2004 (7) TMI 504 - AT - Central Excise

Summary

Issues: Modvat credit denial for fuels used in manufacturing finished goods on job work basis. Interpretation of Rule 57B(1) for Modvat credit eligibility. Comparison with precedent case of National Engineering Industries Ltd. v. Commissioner.

The judgment by the Appellate Tribunal CESTAT, CHENNAI involved the denial of Modvat credit amounting to Rs. 4,97,735/- for fuels used in the generation of steam, which was then utilized in running a hydraulic press for manufacturing certain finished goods on a job work basis. The lower appellate authority had rejected the Modvat credit claim. The appellant argued under Rule 57B(1) which allowed Modvat credit for specified inputs directly or indirectly used in the manufacture of final products within the factory premises. The appellant contended that the fuels in question fell under this category. Additionally, the appellant cited the case of National Engineering Industries Ltd. v. Commissioner where Modvat credit was allowed for LPG used in the treatment of goods for job work. The Tribunal found the appellant to have a strong prima facie case and granted waiver of pre-deposit and stay of recovery.

The primary issue in this judgment was the interpretation of Rule 57B(1) concerning the eligibility of Modvat credit for inputs used in the manufacturing process. The rule allowed Modvat credit for specified items of inputs directly or indirectly used in or in relation to the manufacture of final products within the factory premises. The appellant argued that the fuels used for generating steam, which was essential for running the hydraulic press manufacturing finished goods on job work basis, fell under the category of specified inputs mentioned in Rule 57B(1. The Tribunal, after considering the arguments and the precedent case, agreed with the appellant's interpretation and found a strong prima facie case in favor of granting the Modvat credit.

The comparison with the precedent case of National Engineering Industries Ltd. v. Commissioner was crucial in this judgment. In the cited case, the Tribunal had allowed Modvat credit on LPG used in the treatment of goods for job work, which were later cleared without duty payment. Although the cited case did not directly refer to Rule 57B, the Tribunal found it supportive of the appellant's case based on the facts presented. This comparison highlighted the consistency in allowing Modvat credit for inputs used in job work processes, reinforcing the appellant's claim for Modvat credit for the fuels used in the manufacturing process in the present case.

In conclusion, the judgment by the Appellate Tribunal CESTAT, CHENNAI addressed the denial of Modvat credit for fuels used in manufacturing finished goods on a job work basis, interpreting Rule 57B(1) to determine the eligibility of such inputs for Modvat credit. By comparing the case with the precedent of National Engineering Industries Ltd. v. Commissioner, the Tribunal found a strong prima facie case in favor of granting the Modvat credit, leading to the waiver of pre-deposit and stay of recovery for the appellant.