2001 (10) TMI 798 - AT - Central Excise

Summary

Issues Involved:
Whether deemed Modvat credit under Rule 57G(2) of the Central Excise Rules is available for Aluminium Scrap.

Analysis:
The appeal filed by M/s National Winder raised the issue of whether they were entitled to deemed Modvat credit for Aluminium Scrap under Rule 57G(2) of the Central Excise Rules. The Appellant argued that the scrap purchased from the open market should be deemed duty paid as per the Government Order, and thus, they should be eligible for Modvat credit. They contended that the scrap was originally metal goods that had already suffered duty, making it duty paid. Additionally, they claimed that they believed in good faith that the purchased scrap was eligible for the credit, hence no penalty should be imposed on them.

Counter-Arguments:
On the other hand, the Respondent argued that the Adjudicating Authority had found the aluminium scrap to be old, used, and broken machinery parts, which are clearly recognisable as non-duty paid. They cited a specific case law and emphasized that such parts do not qualify for Modvat credit. The Respondent relied on the decision in C.C.E. v. Electro Steel Casting Ltd. to support their stance.

Judicial Interpretation:
The Tribunal referred to previous decisions, including Machine Builders v. V.C.E. Bolpur and Indian Plastics Ltd. v. C.C.E., to establish the criteria for claiming deemed Modvat credit. The Tribunal reiterated that inputs recognisable as non-duty paid or charged to nil rate of duty do not qualify for the credit. The Appellants failed to rebut the lower authorities' findings that the scrap was old machinery, not subject to excise duty, thus confirming their ineligibility for the credit.

Legal Precedents:
The Tribunal also cited the case of Electro Steel Casting Ltd., where it was clarified that the purpose of the deemed credit scheme was to benefit those using inputs on which duty had actually been paid. Waste and scrap not manufactured as products in a factory were not considered dutiable. The Tribunal emphasized that the intention was not to deem inputs that had not suffered duty as having done so. Consequently, the Appellants were deemed ineligible for the Modvat credit.

Conclusion:
In conclusion, the Tribunal ruled that the Appellants were not entitled to deemed Modvat credit for Aluminium Scrap due to the nature of the scrap being old machinery parts not subject to excise duty. However, the Tribunal found no grounds for imposing a penalty on the Appellants, leading to the partial allowance of the appeal.