2007 (8) TMI 579 - AT - Central Excise

Summary

Issues:
Interpretation of proviso to Notification No. 5/94-C.E. (N.T.) regarding Modvat credit on duty paid on scrap obtained from breaking of imported ship.

Analysis:
The dispute in the appeals revolved around the Modvat credit availed by the appellants on duty paid on scrap obtained by breaking up of imported ship, boat, and other floating structures. The Revenue contended that the credit should be limited to Rs. 920 per tonne or the actual duty paid, whichever is less, as per proviso 2 to Notification No. 5/94-C.E. (N.T.). The authorities had restricted the credit to Rs. 920 per tonne due to the actual duty paid exceeding this amount, leading to a demand for denying the excess credit.

The key contention was whether the restriction in the proviso applied to scrap generated from breaking an imported ship or only to those manufactured in India. The appellants relied on various Tribunal decisions supporting that the restriction applied to scrap from ships manufactured in India. Conversely, the Revenue cited the Sardar Steel Mills case, arguing that the restriction applied to imported ship scrap as well.

The Tribunal analyzed the proviso and held that the restriction of credit applied only to input obtained from breaking ships manufactured in India, not to imported inputs. This interpretation was supported by previous Tribunal decisions and was in line with the wording of the proviso. The Tribunal deemed the Sardar Steel Mills judgment as per incurium due to not considering the earlier decisions favoring the assessees.

Additionally, the Tribunal noted clarifications and trade notices from the Ahmedabad and Chandigarh Commissionerates, stating that the restriction applied to scrap from Indian manufactured ships. It emphasized that Revenue cannot go against its own department's instructions. Consequently, the Tribunal set aside the impugned order, allowing all appeals and providing consequential relief to the appellants.