2002 (8) TMI 610 - AT - Central Excise

Summary

Issues:
Admissibility of Modvat credit on losses generated at the end of the job worker under Rule 57F of the Central Excise Rules.

Analysis:
The case involved two appeals against an order passed by the Commissioner (Appeals) regarding the admissibility of Modvat credit on losses generated at the end of the job worker under Rule 57F of the Central Excise Rules. The appellants, manufacturers of electric fans, sent aluminium ingots for job work under Rule 57F(2) for casting parts of fans. However, the job worker could not return the full quantity of inputs in the shape of processed parts of fans and waste and scrap. The appellants claimed the quantity not received as burning or melting loss during the casting process. The Department issued show cause notices demanding irregular Modvat credit and imposing penalties for the alleged contravention of Rule 57F(2.

The appellant contended that Rule 57A allows Modvat credit for inputs used in or in relation to the manufacture of the final product, and denial of credit was only at the input stage. They argued that during processing at the job worker's premises, wastage is inevitable depending on the nature of inputs, which Rule 57B covers. The appellant cited precedents where the Tribunal allowed Modvat credit on losses of inputs during processing at job workers' premises. The Revenue, represented by the JDR, relied on the Commissioner (Appeals) findings and cited a case regarding the loss of oxygen gas, which was held not covered under Rule 57D.

After considering the submissions, case laws, and precedents cited by both sides, the judge found the ratio of cases relied upon by the appellant applicable in the present case. Consequently, both appeals were allowed, and the impugned orders were set aside. The stay applications were also allowed in light of this decision.