1992 (11) TMI 195

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ed by the Unit which is admittedly clearing the final product without payment of duty. The appellants are manufacturing Pumpable Slurry Explosives (PSE) and supply the same to M/s. Kudremukh Iron Ore Co. as 100% Export Oriented Unit (EOU) under CT-3 certificate free of duty. The appellants' plea is that notwithstanding their supply of the finished product without payment of duty to 100% EOU, they should be allowed to accumulate the MODVAT Credit in respect of the inputs used in the manufacture of final product for utilisation later as and when they start clearing the goods on payment of duty. 2. The representative appearing on behalf of the appellants pleaded that the inputs and the finished products, as it is, are specified under Rule 5....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....put under the MODVAT Scheme. Examining this issue, it is observed that what Rule 57F(3) provides is that the credit of duty allowed in respect of any input can be utilised towards payment of duty on any of the final product in or in relation to the manufacture of which such inputs are used. A plain reading of the rule, when considered in the background of the objective of the MODVAT Scheme, viz. to provide instant credit for the manufacturers and to avoid cascading effect of taxation on input in relation to the final product, it will be clear that this rule in terms will not be .a bar for utilisation of amount of credit which may accumulate because of a situation where the duty on the final product is less man the duty on the inputs for pay....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he final products which have been cleared from the appellants' factory, the question of allowing them the MODVAT Credit on the inputs would not arise. Rule 57C of the Central Excise Rules clearly envisages that no credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to ml rate of duty. The appellants' plea is that as it is the final product is not exempt from payment of duty and only for the specific contingency of supply of the goods to the 100% EOU, the appellants are not called upon to pay duty. We observe that the MODVAT Scheme is applicable to a manufacturing unit to mitigate the i....