2000 (9) TMI 501 - AT - Central Excise

Tribunal rules in favor of appellants on Modvat credit calculation, clarifies Rule 57CC interpretation

The Tribunal ruled in favor of the appellants, holding that the price for reversing Modvat credit should be based on the actual consideration received ... Modvat Issues:Interpretation of Rule 57CC regarding reversal of Modvat credit based on the price charged for footwear sales.Analysis:The dispute in the case revolves around the interpretation of Rule 57CC of the Central Excise Rules, 1944, concerning the reversal of Modvat credit by a footwear manufacturer. The primary contention is whether the price for reversing Modvat credit should be the list price of the footwear deducting applicable taxes, as argued by the Revenue, or the actual consideration received by the manufacturer from customers, as contended by the appellants. The authorities below upheld the Revenue's stance, leading to a demand for duty and a penalty against the appellants.Upon a thorough examination of Rule 57CC(1) and 57CC(8), it is clarified that the 8% reversal of Modvat credit should be based on the price charged by the manufacturer for the goods in question. The appellants argued that 'price' should refer to the actual consideration received from customers, not the gross listed price. This argument is supported by a Board's Circular clarifying that discounts do not form part of transaction value for duty calculation purposes.Moreover, reference is made to a Supreme Court decision emphasizing that trade discounts should not be included in the sale price for tax computation. This principle is deemed applicable to the present case, where the Revenue's insistence on including trade discounts in the price would be unjust. The Trade Notice issued by Calcutta-I also supports the appellants' position, emphasizing the determination of value as per Rule 57CC provisions.In conclusion, the Tribunal agrees with the appellants' interpretation that the price for reversing Modvat credit should be the actual consideration received from customers, excluding trade discounts. The impugned order is set aside, and the appeal is allowed in favor of the appellants, granting them consequential relief.