2005 (4) TMI 452 - AT - Central Excise

Summary

Issues:
1. Improper availment of Modvat credit due to short receipt of inputs in the form of waste and scrap.
2. Interpretation of Rule 57F(5)(i) regarding the return of waste in the form of dross to the appellants.
3. Consideration of melting loss percentage and certification from the Institute of Indian Foundrymen.
4. Requirement of Commissioner's permission for melting loss before goods clearance.

Analysis:
1. The appellants had not received back the entire quantity of inputs in the form of waste and scrap from their job workers, leading to the improper availment of Modvat credit. The Tribunal found that the waste/dross generated at the job worker's premises needed to be returned to the appellants as per Rule 57F(5)(i). The denial of Modvat credit on the short received inputs was deemed appropriate.

2. Rule 57F(5)(i) mandates the return of waste in the form of dross to the appellants. The Tribunal observed that the waste/dross emerging in visible/physical form at the job worker's premises should have been returned to the appellants, as it was not generated in the manufacturer's premises. The decision was based on the distinction between invisible losses and visible waste, emphasizing the need for the job worker to return the waste to the appellants.

3. The consideration of the melting loss percentage and the certification from the Institute of Indian Foundrymen played a crucial role in the judgment. The Tribunal noted discrepancies in the explanation provided for the melting loss percentage and found the Certificate from IIF, Hyderabad, to be unacceptable. The failure to obtain permission from the Commissioner regarding melting loss before goods clearance was also highlighted as a procedural lapse.

4. The appellants' attempt to justify the melting loss percentage after the issuance of a Show Cause Notice was not deemed acceptable. The Tribunal concluded that there was no merit in the appeal, rejecting the claim for Modvat credit on the irregularly received inputs. The denial of Modvat credit amounting to Rs. 45,658 under Rule 57F(5)(i) was upheld as a correct decision, emphasizing compliance with the return of waste to the appellants as required by the rule.