2001 (9) TMI 536 - AT - Central Excise

Summary

Issues:
1. Utilization of aluminium pouches and cardboard cartons as inputs in the manufacture of pesticides.
2. Eligibility of aluminium pouches and cardboard cartons as inputs under Rule 57A.
3. Imposition of penalty for wrongly taking Modvat credit.

Analysis:
1. The appellant, engaged in pesticide manufacturing, availed Modvat credit but was alleged not to have utilized aluminium pouches and cardboard cartons in its factory for pesticide production. The jurisdictional Superintendent's report claimed the appellant installed a machine for pouch utilization in 1997, implying non-usage during the notice period. However, the appellant contended it used pouches earlier too. The Tribunal found this claim reasonable, setting aside the pouches issue for further evidence consideration by the Additional Commissioner.

2. Regarding cardboard cartons, the appellant supplied them to a job worker for packing pesticides, not using them in its factory. The dispute arose on whether these cartons qualify as inputs under Rule 57A. The Tribunal noted that the rules require inputs to be used in or related to manufacturing excisable goods. As the job worker didn't pay duty or engage in manufacturing, the cartons weren't inputs for the appellant. The argument that carton costs were included in assessable value lacked substantiation. The Tribunal clarified the distinction between inputs for the job worker and the appellant, denying eligibility for the latter.

3. The Tribunal addressed the penalty imposition for wrongly availing Modvat credit. Rule 173Q(b) allows penalties for incorrect credit claims. Despite the lack of mala fides shown, the Tribunal upheld the penalty due to the appellant's incorrect belief regarding cartons and potentially pouches. However, as the pouch usage remained unproven and a single penalty was imposed for both issues, the Tribunal set aside the penalty for quantification in subsequent proceedings.