2006 (11) TMI 501 - AT - Central Excise

Summary

Issues:
Central Excise duty liability on manufacturing and re-rubberisation activities, applicability of Rule 57CC regarding the use of modvated common inputs, contention of not taking Modvat credit for re-rubberisation inputs, interpretation of Rule 57CC in the context of manufacturing both dutiable and exempt goods, maintenance of separate accounts for inputs, absence of verification on the use of modvated inputs for re-rubberisation.

Analysis:
The appellant, engaged in manufacturing rubberized steel rollers subject to Central Excise duty and re-rubberisation of old rollers exempt from duty, faced duty demand and penalty under Rule 57CC for allegedly using modvated common inputs for both activities. The appellant argued against the application of Rule 57CC, emphasizing the non-utilization of Modvat credit for re-rubberisation inputs, thus not falling under the rule's purview. The appellant contended that re-rubberisation, being non-manufacturing, didn't classify them as a producer of both dutiable and exempt goods, a prerequisite for Rule 57CC. The absence of credit utilization on re-rubberisation inputs further supported the appellant's position.

The appellant's representative presented evidence showing separate procurement and accounting for re-rubberisation inputs, indicating compliance with non-utilization of Modvat credit. The appellant's assertion was substantiated by statements confirming the distinct treatment of inputs until a specified period. The Tribunal acknowledged that re-rubberisation is not a manufacturing activity, thus negating the applicability of Rule 57CC based on the absence of utilizing modvated inputs for the said process. Moreover, the Tribunal noted the lack of verification or refutation by the Excise department regarding the appellant's claim, highlighting procedural gaps in the investigation.

The Tribunal found merit in the appellant's contentions, ruling in favor of the appellant by setting aside the Commissioner's decision. The Tribunal deemed the Commissioner's order legally and factually unsustainable due to the absence of evidence supporting the use of modvated inputs for re-rubberisation and the failure to address this crucial aspect. The judgment emphasized the necessity of factual findings to substantiate duty demands under Rule 57CC, which were lacking in the present case. Consequently, the appeal was allowed, providing consequential relief to the appellant.

In conclusion, the judgment clarified the non-applicability of Rule 57CC to the appellant's re-rubberisation activity, emphasizing the importance of factual verification and adherence to legal requirements in imposing duty demands under Central Excise rules.