2007 (6) TMI 358 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit for waste input.

Analysis:
The appeal challenges the denial of Modvat credit amounting to Rs. 49,480 on the basis that the input in question was deemed waste and cleared as such. The appellant argues that the inputs were wasted/rejected during the manufacturing process, citing para '16' of the reply to the show cause notice. Reference is made to the judgment of the Hon'ble High Court of Delhi in the case of Asahi India Safety Glass Limited v. Union of India, where it was held that if a material is used for manufacturing and later found defective, denying credit is not justified under Rule 57A read with Rule 57D. The High Court emphasized that the process of manufacture commences when the material is used, even if defects are discovered later, and that waste occurring during the manufacturing process should not result in credit reversal.

The appellant's case aligns with the High Court's ruling in the Asahi India Safety-Glass Limited case, which established that waste during the manufacturing process does not necessitate credit reversal. The High Court clarified that waste occurring after the commencement of manufacturing should not lead to credit denial. In this instance, the Aluminum foil issued for manufacturing was wasted/rejected during the manufacturing process, mirroring the circumstances in the Asahi India Safety-Glass Limited case. Consequently, the denial of credit amounting to Rs. 49,480 is overturned, leading to the success of the appeal. As the appeal regarding credit is allowed, penalties and interest claims are also dismissed.

In conclusion, the judgment highlights the importance of recognizing waste occurring during the manufacturing process and upholds the principle that such waste should not result in the reversal of credits. The decision provides clarity on the treatment of waste inputs and sets a precedent based on the interpretation of relevant rules and judicial precedents.