2002 (2) TMI 791 - AT - Central Excise

Summary

Issues:
1. Pre-deposit requirement under Central Excise Rules, 1944.
2. Applicability of Modvat credit on returned goods.
3. Mandatory requirements under Rule 173H and Rule 173L for returned goods.

Pre-deposit Requirement:
The appellants were directed to pre-deposit a specified amount alleged to be wrongly availed by them under Rule 57-I of Central Excise Rules, 1944, along with a penalty under Rule 173Q of the C.E. Act. The Tribunal decided to address both the stay petition and the appeal together due to the matter being covered by a previous Tribunal judgment. After granting a waiver of pre-deposit, the appeal was taken up for disposal in accordance with the law.

Applicability of Modvat Credit:
The Commissioner noted that the goods were returned to the factory due to a lockout at the recipient factory and were not solely for repairing or reconditioning purposes. The appellant had availed Modvat on 10% of the returned goods used in manufacturing further excisable goods, while the remaining 90% were cleared by paying duty a second time. The Tribunal considered a similar case precedent where Modvat credit was allowed on returned components used in the final product, emphasizing that Modvat credit cannot be denied based on goods leaving and returning to the factory after payment of duty.

Mandatory Requirements for Returned Goods:
The lower authorities had denied Modvat credit, citing the mandatory requirement of filing a D3 declaration under Rule 173H or Rule 173L for returning duty-paid goods to the factory. The Senior Departmental Representative argued that the denial of credit was justified. However, the Tribunal, following the precedent and reasoning from a previous judgment, held that Modvat credit cannot be denied in cases where duty-paid components are returned due to external circumstances like a factory lockout. The appeal was allowed, setting aside the Commissioner (Appeals) order.

This judgment addressed the pre-deposit requirement, applicability of Modvat credit on returned goods, and the mandatory filing requirements under Rule 173H and Rule 173L. The Tribunal ruled in favor of the appellant, allowing the appeal and emphasizing that Modvat credit cannot be denied merely because duty-paid components were returned to the factory due to external factors like a lockout at the recipient factory.