2003 (7) TMI 601 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rules 56A, 57A, and 96E regarding availing Proforma credit/Modvat credit.
2. Admissibility of credit of duty on cotton yarn under different Central Excise Rules.
3. Discharge of duty liability on final products under Rule 157 and Rule 173N.

Analysis:

Issue 1: Interpretation of Rules 56A, 57A, and 96E regarding availing Proforma credit/Modvat credit:
The appeal by Revenue challenged the Order-in-Appeal that allowed the respondents to avail Proforma credit/Modvat credit for duty paid yarns under Rules 56A/57A. The Revenue contended that the use of Rule 96E alongside Rules 56A and 57A would be against the provisions of these Rules. The respondents argued that nothing in the rules forbids them from taking Modvat credit if they have utilized the procedural advantage of Rule 96E. The Commissioner (Appeals) thoroughly analyzed the concept of these rules and concluded that the respondents correctly availed Proforma credit/Modvat credit. The Tribunal agreed, stating that there is no specific prohibition in the rules against taking credit for semi-finished goods sent for further processing and cleared after payment of duty.

Issue 2: Admissibility of credit of duty on cotton yarn under different Central Excise Rules:
The case involved the removal of cotton yarn under Rule 96E for further processing and manufacturing of sewing thread. The Revenue alleged that the respondents were not entitled to remove the yarn without payment of duty under Rule 96E, as the credit taken on such yarn was irregular. However, the Commissioner (Appeals) and the Tribunal found that the duty liability on the final products was discharged under Rule 157, as modified by Rule 173N. As the goods were duly accounted for and the duty was paid on the final products, the Proforma credit/Modvat credit was correctly availed by the respondents.

Issue 3: Discharge of duty liability on final products under Rule 157 and Rule 173N:
The Tribunal emphasized that the final products were not exempt from duty under Rule 96E, but the facility of warehousing/re-warehousing was granted without payment of duty. The duty liability on the final products was ultimately discharged by the consignee under Rule 157, as modified by Rule 173N. The Tribunal agreed with the Commissioner (Appeals) that since duty was paid on the final products, Proforma credit/Modvat credit could not be denied to the respondents. The re-warehousing certificates provided further evidence that duty liability was discharged, supporting the decision to set aside the demand confirmed and penalty imposed by the Revenue.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the appeal filed by the Revenue, confirming that the respondents correctly availed Proforma credit/Modvat credit in respect of duty paid yarns under the relevant Central Excise Rules.