2005 (5) TMI 450 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 173H regarding Modvat credit for damaged goods; Allegation of manufacturing new products from damaged wires; Merits of the impugned order; Point of limitation in the case.

Interpretation of Rule 173H regarding Modvat credit for damaged goods:
The appellant, engaged in manufacturing bare copper wire and enamelled winding wire, faced issues regarding the Modvat credit of duty paid on rejected wires by customers. The Central Excise Authorities contended that the rejected wires, not melted and remade into new wires, were ineligible for Modvat credit. The appellant then followed Rule 173H, filing D3 intimation, entering damaged goods in Annexure V register, and remaking goods under Revenue's direction.

Allegation of manufacturing new products from damaged wires:
A show cause notice raised a duty demand for manufacturing new wires from damaged ones, alleging it fell outside Rule 173H's scope. The appellant argued that the process of transforming damaged wires into new ones was covered by the term "remade" in Rule 173H. They ceased Modvat credit use as per the department's insistence, following Rule 173H procedures with Revenue's consent, negating any suppression or misstatement.

Merits of the impugned order:
The appellant challenged the order on merits and limitation. Referring to the Triveni Sheet Glass Works Ltd. case, the appellant argued that the remaking process covered by Rule 173H included transforming damaged wires into new ones. The Tribunal's detailed findings supported this interpretation, emphasizing the wide import of the term "remake" to cover transformation processes.

Point of limitation in the case:
The Tribunal found merit in the appellant's submissions, concluding that the remaking process encompassed transforming rejected items into new ones under Rule 173H. As the appellant switched to Rule 173H at Revenue's insistence, no suppression could be attributed to them. The appellant was entitled to Modvat credit on rejected goods, which could be used for duty payment on remade goods. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant, with consequential relief granted.