2003 (7) TMI 401 - AT - Central Excise

Summary

Issues involved:
Recovery of Modvat credit on bursted bags used in cement manufacturing process; Denial of Modvat credit by lower authorities; Payment of duty on bursted bags; Appeal against earlier order of Commissioner (Appeals); Legal position regarding finality of Commissioner (Appeals) order.

Analysis:
The case involved the recovery of Modvat credit on bursted bags used in the cement manufacturing process. The appellants, engaged in cement manufacturing, were availing Modvat credit on P.P. & Paper Bags used for packaging. The issue arose when a certain number of bags bursted during the filling operation and were subsequently cleared by the appellants on payment of duty. The lower authorities issued show cause notices proposing recovery of Modvat credit on the bursted bags, leading to three adjudication orders confirming the duty demand. The Commissioner (Appeals) upheld the decision, stating that the bursted bags did not play a role in making the cement marketable and, therefore, Rule 57D was not applicable.

The appellants contended that the bursted bags should be considered as inputs covered by Rule 57D, as they were in good condition upon receipt and bursted during the filling operation. They argued that the bags were duly recorded and issued for packing before bursting, making them part of the manufacturing process. Additionally, the appellants cleared the bursted bags on payment of duty, considering them as waste and scrap, which was more than the Modvat credit involved. They also highlighted that the Revenue had not appealed against an earlier order of the Commissioner (Appeals), which they believed had attained finality.

After considering the submissions, the Tribunal found merit in the appellants' arguments. It noted that there was no provision for duty payment on bursted bags at clearance, especially since the bags were not manufactured or cleared as inputs. The Tribunal set aside the impugned order and remanded the matter for verification of the duty paid on bursted bags compared to the Modvat credit availed. The Assistant Commissioner was tasked with examining the applicability of Rule 57D and the Revenue's appeal status against the earlier Commissioner (Appeals) order. The Tribunal emphasized the need for a de novo decision based on the observations made, allowing the appellants to present their arguments on Rule 57D applicability during the reassessment.

In conclusion, the judgment focused on the interpretation of Rule 57D concerning Modvat credit on bursted bags in the cement manufacturing process, emphasizing the need for a thorough reassessment of the duty payment, credit availed, and the legal implications of the Commissioner (Appeals) order.