1995 (5) TMI 104 - AT - Central Excise

Appellate Tribunal Upholds Modvat Credit for Duty Paid by Supplier (2)

The Appellate Tribunal CEGAT, Madras upheld the decision of the Collector (Appeals) to allow Modvat credit to the respondents for the duty paid by the ... Modvat credit Issues:1. Modvat credit on differential duty paid by supplier2. Interpretation of Rule 57F(2) of Central Excise Rules, 1944Analysis:1. The appeal before the Appellate Tribunal CEGAT, Madras involved the issue of Modvat credit on the differential duty paid by the supplier of distributors. The Collector of Central Excise (Appeals) had allowed the Modvat credit to the respondents for the amount of Rs. 48,547, which was the differential duty paid by the supplier due to the inclusion of one component in the value of the distributor covers. The original authority had denied the Modvat credit, stating that the duty paid by the supplier was not legally required and could be considered a voluntary deposit. The Appellate Tribunal, however, upheld the decision of the Collector (Appeals) and allowed the Modvat credit to the respondents, emphasizing that the duty paid by the supplier was eligible for credit as the component had become a part of the distributor cover, making it a new excisable commodity.2. The interpretation of Rule 57F(2) of the Central Excise Rules, 1944 was a crucial aspect of the judgment. The rule pertains to the manner of utilization of inputs and the credit allowed in respect of duty paid on those inputs. The Appellate Tribunal analyzed the application of Rule 57F(2) in the case where the job worker had cleared the inserts without payment of duty to the supplier. The Tribunal observed that the inserts had become a component of the distributor cover, necessitating the payment of duty. Despite the incorrect availment of the benefit of Rule 57F(2) in the case of insert removal without duty payment, the Tribunal held that the respondents were entitled to Modvat credit for the duty paid on the distributor covers. The Tribunal concluded that the respondents had complied with the provisions of Rule 57F(2) and were eligible for the Modvat credit, dismissing the appeal filed by the Revenue.In conclusion, the judgment by the Appellate Tribunal CEGAT, Madras upheld the decision of the Collector (Appeals) to allow Modvat credit to the respondents for the duty paid by the supplier on the distributor covers. The Tribunal's analysis of Rule 57F(2) emphasized the eligibility of the respondents for the Modvat credit despite the issues related to the removal of inserts without duty payment, ultimately dismissing the appeal filed by the Revenue.