2005 (2) TMI 754 - AT - Central Excise

Summary

Issues:
Recovery of Modvat credit under Rule 57-I for processing loss during repacking by job workers.

Analysis:
The appellants, manufacturers of herbal shampoo, faced a dispute regarding the recovery of Modvat credit under Rule 57-I of the Central Excise Rules, 1944 for a processing loss of 2% occurring during the repacking of shampoo by their job workers. Show cause notices were contested, and the demand was confirmed by the original authority and the Commissioner (Appeals), leading to the present appeals by the assessee.

The learned Counsel for the appellants argued that they were entitled to credit under Rule 57D(1) for the duty paid on the 2% quantity of shampoo wasted at the job worker's end. He cited a Board's Circular and two Tribunal decisions to support his claim. On the other hand, the learned SDR reiterated the Commissioner (Appeals)' findings, contending that the waste of shampoo in this case was not similar to the input loss considered in the Board's Circular.

Upon review, it was found that 2% of shampoo was indeed wasted during the repacking process at the job worker's premises, directly related to the manufacture of the final product. Rule 57D(1) allowed Modvat credit for such input waste, a position supported by the Tribunal decisions cited by the appellants. The decision in the case of Godrej Soaps Ltd. and the 2-Member Bench decision in the case of Bush Boake Allen (I) Ltd. affirmed the appellants' entitlement to Modvat credit for the 2% input waste. Consequently, the impugned order was set aside, and the appeals were allowed, granting the appellants the Modvat credit they sought.

This judgment clarifies the application of Rule 57D(1) in cases of processing loss during repacking activities by job workers and emphasizes the eligibility of manufacturers to claim Modvat credit for such input waste, as established through relevant legal provisions and precedents.