2005 (2) TMI 688 - AT - Central Excise

Summary

Issues:
1. Entitlement to Modvat credit of inputs for manufacturing finished products.
2. Denial of deemed credit under Notification No. 58/97.

Analysis:
1. The case involved M/s. Minex Metallurgical Co. Ltd., engaged in manufacturing excisable goods under Chapter 72 of the Central Excise Tariff Act, 1985, and availing Modvat credit for inputs under Rule 57A of the Central Excise Rules, 1944. The issue was whether the appellants were entitled to Modvat credit for using MS Defective Flat Bars, MS Defective Angles, and short length cuttings in the manufacture of their final products.

2. The Revenue denied deemed credit under Notification No. 58/97, alleging that the materials were used for melting purposes only and their value was similar to scrap. The Tribunal found fault with the denial of credit under the notification, stating that if there were concerns about the valuation, the proper course of action for the Officer was to correct the valuation at the supplier's end before denying credit under Rule 57E, rather than invoking Rule 57-I.

3. The Jt. Commissioner had confirmed a demand of Rs. 2,40,318/- under Rule 57-I(2) of the Central Excise Rules, 1944, and imposed an equal penalty. The Commissioner (Appeals) upheld this decision. However, the Tribunal referred to previous decisions on similar issues, such as CCE, Rajkot v. M/s. Hindustan Lever Ltd. and M/s. Pearl Soap Co. Ltd. v. CCE, Mumbai-II, where findings favored the appellants. Consequently, the Tribunal set aside the order and allowed the appeal, emphasizing the need for proper valuation and classification before denying credit.

4. In conclusion, the Tribunal ruled in favor of the appellants, highlighting the incorrect application of Rule 57-I in denying Modvat credit and emphasizing the importance of adhering to proper procedures for valuation and classification before disallowing credits. The decision was based on precedents and the inadequacy of the reasons provided for denying the credit under Notification No. 58/97.