1995 (7) TMI 205 - AT - Central Excise

Modvat credit allowed for duty paid inputs used in products cleared after 1-3-1987 under Rule 57H.

The Tribunal held that modvat credit on duty paid inputs is permissible under Rule 57H of the Central Excise Rules, 1944, for inputs used in products ... Modvat - Transitional provisions Issues: Interpretation of Rule 57H of the Central Excise Rules, 1944 regarding modvat credit on duty paid inputs.Analysis:1. The judgment pertains to an application filed by the Revenue under Section 35G(1) of the Central Excises and Salt Act, 1944, seeking reference of a question of law arising from a final order. The question at hand was whether modvat credit on duty paid inputs is permissible under Rule 57H(1) of the Central Excise Rules, 1944, as contended by the department, or under Rule 57H(1)(ii) as argued by the Appellate Tribunal, New Delhi.2. The crux of the matter revolved around the interpretation of Rule 57H of the Central Excise Rules, 1944. The lower Appellate authority had ruled that the benefit of modvat credit would only apply to inputs used in the manufacture of final products cleared on or after 1-3-1987, excluding inputs consumed in products existing as of that date. The Tribunal, however, relied on a previous order to extend the modvat credit benefit even to inputs already utilized before the specified date, provided the conditions of Rule 57H(l)(b) were met.3. The learned DR contended that Rule 57H(1)(ii) supplements Rule 57H, allowing credit on inputs received just before obtaining acknowledgment, and argued against granting credit for inputs used in products already cleared and unavailable for verification. The DR urged the reference of the legal question to the High Court for resolution.4. In response, the advocate for the applicants highlighted Rule 57H's provisions, emphasizing that credit could be allowed for inputs used in products cleared after 1-3-1987, regardless of availability for verification. The advocate argued that both conditions of Rule 57H were disjunctive, not conjunctive, and satisfying either sufficed for claiming modvat credit. Rejecting the DR's interpretation, the advocate asserted that no legal question merited High Court reference.5. The Tribunal, after considering both parties' arguments, concurred with the respondents' counsel. It was held that Rule 57H did not restrict credit to verifiable inputs, emphasizing that credit could be granted for inputs used in products cleared post-1-3-1987. The Tribunal also dismissed the DR's objection to the lack of proof regarding the condition in para (ii) of Rule 57H(1), as it was not raised earlier. Consequently, the Tribunal rejected the reference application, affirming that no legal question necessitated High Court intervention.