2003 (1) TMI 586 - AT - Central Excise

Summary

Issues:
- Modvat Credit disallowed for LDPE blank film used in the manufacture of PVC resin, Caustic soda, and Ilminite.

Analysis:
The appeal involved a dispute regarding the denial of Modvat Credit for LDPE blank film used in the manufacturing process of PVC resin, Caustic soda, and Ilminite. The appellant, a manufacturer of various chemicals, including Caustic Soda, Hydrochloric Acid, Tricholoroethylene, PVC resin, and Ilmenite, had faced disallowance of Modvat Credit by the original authority. The LDPE blank film was utilized in salt pans to prevent seepage of saline water, which was crucial for the production of Caustic Soda. Initially, the Modvat Credit was denied on the grounds that the LDPE film was used in salt pans, not within the manufacturing premises, and that salt was not an excisable product, making the LDPE film ineligible for the credit. However, the appellant argued that the salt was a crucial raw material for Caustic Soda production, and they had included salt pans in the Registration Certificate to avail Modvat Credit. The appellant cited relevant case laws, including a Supreme Court judgment, to support their claim that the input need not be utilized only within the factory premises to qualify for Modvat Credit.

The learned Counsel for the appellant emphasized that the inclusion of salt pans in the Registration Certificate was done well before the denial of Modvat Credit and relied on legal precedents to argue in favor of allowing the appeal. The Commissioner (Appeals) supported the original decision to disallow the Modvat Credit. However, the presiding judge reviewed the submissions and legal references provided by the appellant. The judge referred to Supreme Court judgments in similar cases, emphasizing the liberal interpretation of the rules regarding Modvat Credit eligibility. The judge highlighted that items used for the manufacture of final products, even if not directly within the factory premises, could qualify for Modvat Credit. Additionally, the judge disagreed with the classification of salt as a natural product, pointing out the process involved in its production by the appellant, which included specific manufacturing steps. Consequently, the judge concluded that the original decision to disallow the Modvat Credit for LDPE blank film was incorrect and illegal, setting it aside and allowing the appeal with consequential relief, if any.