2007 (2) TMI 546 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57AG(2) of the Central Excise Rules regarding payment of credit on inputs and finished goods.
2. Classification of compounded rubber as an intermediate product subject to excise duty.
3. Applicability of previous case laws on the current matter.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore involved the interpretation of Rule 57AG(2) of the Central Excise Rules concerning the payment of credit on inputs and finished goods. The appellants, who are manufacturers of tread rubber, opted for duty exemption under Notification 8/2000 without availing the Cenvat Scheme. The dispute arose when the Revenue claimed that the appellants had not reversed the credit on compounded rubber and rubber waste, totaling Rs. 1,22,070/-. The lower authorities upheld the demand, leading to the appeal. The appellants argued that waste products should not be considered finished goods and, therefore, not subject to credit reversal under Rule 57AG(2).

The Tribunal analyzed previous judgments, including Guardian Rubber Pvt. Ltd. v. CCE, Cochin, to determine the scope of credit reversal while opting out of the Modvat Scheme. It was held that waste products are not classified as finished goods, and thus, the credit on inputs contained in waste need not be reversed. However, regarding compounded rubber, the Tribunal deemed it as having a longer shelf life and being an input in the manufacture of tread rubber, making it liable for excise duty. The appellants' argument that Rule 57AG(2) did not apply to compounded rubber was dismissed. Consequently, the Tribunal partially allowed the appeal, ruling that the credit attributable to waste need not be reversed, but the credit linked to compounded rubber must be reversed.

The Tribunal's decision clarified the treatment of waste and compounded rubber in the context of excise duty liability, aligning with the principles established in relevant case laws. By upholding the demand for credit reversal on compounded rubber while exempting waste from the same requirement, the Tribunal provided a nuanced interpretation of Rule 57AG(2) and its application to different types of materials used in manufacturing processes.