1997 (3) TMI 529 - AT - Central Excise

Scrap or reprocessed granules covered by Notification No. 53/88-C.E. as deemed to be duty paid

Summary

Issues:
The appeal against the order confirming duty demand on plastic film due to non-payment of duty on scrap and reprocessed granules.

Details:
The appellant used duty paid plastic granules to manufacture plastic films, generating scrap as a by-product. The scrap was reprocessed into granules and reused in film production. The dispute arose as the duty was not paid on the scrap or reprocessed granules. The Commissioner upheld the demand, citing non-satisfaction of the condition in the notification regarding duty payment on inputs.

The notification specified that films must be made from goods on which excise duty had been paid. The Tribunal's precedent established that goods cleared at nil duty rate under an exemption were deemed duty paid. The appellant argued that exemption under the notification covered the scrap and reprocessed granules, fulfilling the duty payment condition.

A new argument was raised by the Respondent's representative, contending that availing Modvat credit on duty paid granules rendered them as non-duty paid goods, thus disqualifying the exemption. This argument relied on a previous Tribunal decision which created a fiction treating Modvat credited goods as non-duty paid.

Contrary to the above decision, a Larger Bench ruling clarified that Modvat scheme involves reimbursement of duty paid on inputs, not negating the fact that duty was paid. The reimbursement aspect signifies duty payment and return of the amount to the manufacturer. Therefore, the duty paid on original granules, despite Modvat credit, was upheld. Consequently, the department's new contention was rejected.

Based on the above analysis, the impugned order was set aside, and the appeal was allowed.