1996 (5) TMI 144 - AT - Central Excise

Claiming Notional Higher Credit of Duty on Inputs: Tribunal's Ruling on Central Excise Rules

The Tribunal held that notional higher credit of duty on inputs under Rule 57B of the Central Excise Rules, 1944 can only be claimed on basic excise duty, ... Modvat Issues:Interpretation of Notification No. 175/86 regarding notional higher credit of duty on inputs under Rule 57B of the Central Excise Rules, 1944 for basic excise duty and special excise duty.Detailed Analysis:The appellant, a manufacturer of Automotive tubes and rubber products, availed notional higher credit of duty on inputs purchased from SSI units under Rule 57B of the Central Excise Rules, 1944, along with special excise duty. The dispute arose when the Superintendent of Central Excise issued a show cause notice questioning the admissibility of higher notional credit specifically in relation to special excise duty. The Assistant Commissioner upheld the notice, directing the appellant to pay a specified amount, which was confirmed by the Collector (Appeals) leading to the current appeal (Para 2).The crux of the matter lies in the interpretation of Clause (5) of Notification No. 175/86, which governs the allowance of credit on inputs under Rule 57B. The notification specifies that the credit in respect of inputs shall be allowed at the rate of duty applicable under the notification plus an additional amount, either 5% ad valorem or the rate of duty otherwise applicable. The notification pertains to goods subject to concessional duty and received in a factory for use as inputs in manufacturing final products under the Modvat rules (Para 3).The Tribunal considered previous decisions on the matter, notably the conflicting views in cases such as Reckitt & Colman of India Ltd., Sarada Service Corporation, and Collector of Central Excise v. Eimco Elecon (India) Ltd. The Tribunal concluded that notional credit can only be claimed on basic excise duty, excluding special excise duty. The correct procedure involves calculating notional basic excise duty first, then adding the actual special excise duty paid, with credit taken for the total amount. The Tribunal held that the view of the lower authorities was correct, dismissing the appeal (Para 5).