2001 (12) TMI 693 - AT - Central Excise

Summary

Issues:
1. Admissibility of Modvat credit on inputs used in the manufacture of waste and scrap.
2. Interpretation of Rule 57H of the Central Excise Rules, 1944.
3. Treatment of waste and scrap as final products for the purpose of availing credit.

Issue 1: Admissibility of Modvat credit on inputs used in the manufacture of waste and scrap:
The appellants manufactured M.S. Pipes and Tubes, and prior to 1-3-94, these products were exempt from duty along with waste and scrap. Post 1-3-94, the exemption was withdrawn, and the appellants opted for availment of inputs-credit under Rule 57A for payment of duty on final products from 9-3-94. The dispute arose when the Department proposed to disallow Modvat credit on inputs used in the waste and scrap lying in stock as on 9-3-94. The lower appellate authority erroneously treated waste and scrap as inputs, leading to a denial of credit. However, the waste and scrap were considered final products chargeable to duty since 9-3-94. The Tribunal clarified that waste and scrap were indeed final products, as per the Central Board of Excise & Customs' circular and previous Tribunal decisions. The appellants were found entitled to credit for duty paid on inputs used in waste and scrap manufacture, which were cleared post 9-3-94.

Issue 2: Interpretation of Rule 57H of the Central Excise Rules, 1944:
Rule 57H allowed manufacturers of final products to avail credit of duty on inputs used in the manufacture of final products lying in stock upon filing a declaration under Rule 57G. In this case, the declaration was filed on 9-3-94, and the waste and scrap were considered final products chargeable to duty post that date. The Tribunal emphasized that the appellants met all conditions for input-credit under Rule 57H, making the credit admissible to them. The lower appellate authority failed to address the crucial question of whether the credit on inputs used in waste and scrap manufacture was permissible, leading to the Tribunal's intervention to grant relief to the appellants.

Issue 3: Treatment of waste and scrap as final products for availing credit:
The Tribunal clarified that waste and scrap, present in stock as of 9-3-94, were deemed "final products" under Rule 57H. The inputs, specifically CR Sheets, used in manufacturing waste and scrap were duty-paid, and the appellants fulfilled all conditions for availing Modvat credit on these inputs. The Commissioner (Appeals) wrongly denied the credit by treating waste and scrap as inputs, whereas they were final products subject to duty payment since 9-3-94. The Tribunal set aside the Commissioner's order and allowed the appeal, providing consequential relief to the appellants.