2004 (3) TMI 578 - AT - Central Excise

Cenvat/Modvat credit - Utilisation of - Departmental instructions vis-a-vis Tribunal decision

Summary

Issues:
1. Whether Modvat credit on Polystyrene utilized for final products is admissible without one-to-one correlation between input and final product under Rule 57F(3).
2. Interpretation of Board's Circular No. 27/90-CX. 8 regarding the correlation requirement between input and final product.

Analysis:
1. The appellants availed Modvat credit on Polystyrene for final products during a specific period. The lower authorities disallowed the credit due to lack of evidence of Polystyrene usage in the final products. The appellants argued that Rule 57F(3) did not mandate a one-to-one correlation between input and final product. They cited precedents like CCE v. Nisha Conductors, Rama Cables & Wires Ltd v. CCE, and Indian Aluminium Co. Ltd. v. CCE to support their stance. The Tribunal agreed that one-to-one correlation was not required for Modvat credit under Rule 57F(3). The Tribunal emphasized that the utilization of inputs was an admitted fact, and the rules did not necessitate proving direct usage in final products for credit utilization.

2. The Senior Departmental Representative (SDR) argued that Board's Circular No. 27/90-CX. 8 mandated a one-to-one correlation between input and final product under Rule 57A at the relevant time. The SDR highlighted that the Tribunal's decision in Nisha Conductors did not consider this Circular as it pertained to a period before 1990. However, the Tribunal asserted that the Circular did not override its interpretation of the rules. The Tribunal emphasized that unless a higher judicial forum disapproved the Tribunal's decision, it would prevail over conflicting circulars. The Tribunal reiterated that one-to-one correlation was not obligatory for Modvat credit, as established by previous judgments and the underlying principle of the Modvat rules.

In conclusion, the Tribunal held that the Modvat credit on Polystyrene for final products was admissible to the appellants. The Tribunal set aside the lower authorities' decision and allowed the appeal, emphasizing that the one-to-one correlation between input and final product was not a prerequisite for availing Modvat credit under Rule 57F(3).