2001 (8) TMI 1021 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit on aluminium foil-stock by authorities.
2. Utilization of Modvat credit for payment of duty on rolled and extruded products.
3. Interpretation of Modvat rules regarding declaration of inputs and final products.

Analysis:

Issue 1: Disallowance of Modvat credit on aluminium foil-stock
The appellants availed Modvat credit on aluminium foil-stock used in manufacturing thin gauge coils and aluminium foils. The Revenue contended that the credit related to aluminium scrap generated in the factory and used in the production of rolled and extruded products was not eligible for duty payment on those products. Show cause notices were issued, leading to the impugned orders disallowing the Modvat credit.

Issue 2: Utilization of Modvat credit for payment of duty
The appellant argued that the Modvat credit disallowed was unjustified as waste and scrap arising from foil-stock were declared inputs for manufacturing rolled and extruded products. The Revenue objected, stating that the scrap was used as a new input for rolled and extruded products, setting up a new input-output sequence. However, the appellant had declared waste and scrap as inputs for rolled and extruded products and utilized the credit on foil-stock for duty payment on the final products.

Issue 3: Interpretation of Modvat rules
The Tribunal analyzed the Modvat rules and observed that waste and scrap generated during the manufacture of aluminium foils were covered under the rules. The Revenue's objection was based on the declaration of final products against specific inputs. The Tribunal found the objection unsustainable, as the appellant had correctly declared waste and scrap as inputs for rolled and extruded products. Denying Modvat credit based on technicalities was deemed unjustified, especially when the inputs and final products were appropriately declared. Consequently, the impugned orders were set aside, and the appeals were allowed in favor of the appellants.