1995 (1) TMI 206 - AT - Central Excise

Denial of Modvat credit upheld by Appellate Tribunal - Notification lacks provision for adjusting credit

INDIAN PLYWOOD MFG. CO. LTD Versus COLLECTOR OF C. EXCISE, BOMBAY-I

INDIAN PLYWOOD MFG. CO. LTD Versus COLLECTOR OF C. EXCISE, BOMBAY-I - 1995 (78) E.L.T. 164 (Tribunal) Issues: Appeal against rejection of Modvat credit under Notification No. 225/86-C.E. for inputs; Interpretation of Rule 57E and Notification provisions; Comparison with previous case law for Modvat credit eligibility.In this judgment by the Appellate Tribunal CEGAT, BOMBAY, the appeal was made against the rejection of Modvat credit under Notification No. 225/86-C.E. for inputs. The facts were undisputed that additional duty was paid for inputs received under the said Notification, which exempts the final product from excise duty equivalent to the duty paid on inputs. The appellants opted to take credit in the set-off register instead of following the legal requirement of availing the benefit at the time of clearance. When the inputs faced a demand for additional duty, the manufacturer paid the duty and provided a duty payment certificate to the appellants, who sought credit in the Modvat account under Rule 57E, a request rejected by the authorities.The Ld. Advocate argued based on a previous case involving Apar Ltd., where Modvat credit was allowed for inputs initially received at nil duty rate but later subjected to duty payment. However, the Tribunal noted that Notification No. 225/86 did not provide for adjusting credit when duty paid on inputs changed. Unlike Rule 56A and Notification No. 201/79, Notification No. 225/86 did not have provisions for varying credit based on subsequent duty changes. Rule 57E only applied to Modvat credit initially taken, not to adjustments due to duty variations. The absence of such provisions justified the denial of credit by the lower authorities.The Tribunal distinguished the present case from the Apar Ltd. case, emphasizing that Notification No. 225/86 granted exemption on final products based on duty paid on inputs, without allowing for credit adjustments. When duty was paid on inputs, the only recourse was refund under Section 11B, not Rule 57E. The benefit of Rule 57E was limited to cases where Modvat credit provisions existed for duty on final products, which was not the case under Notification No. 225/86. Consequently, the appeal was rejected based on the lack of legal provisions for Modvat credit under the specific Notification.