2008 (9) TMI 743 - AT - Central Excise

Summary

Issues:
1. Whether Modvat credit on Viscose Staple Fibre used in the manufacture of Viscose Blended Cotton Yarn could be denied to the respondents for a specific period.

Analysis:

1. The appeal dealt with the question of denying Modvat credit on Viscose Staple Fibre used in manufacturing Viscose Blended Cotton Yarn during a particular period. The issue was whether the intermediate product, carded/combed cotton, was specified as a final product for input duty credit during that period. The Revenue argued that since carded/combed cotton was not specified as a final product under Rule 57A before 21-10-94, anything used in its manufacture was not a Modvatable input. On the contrary, the respondents contended that carded/combed cotton was not an excisable good, and therefore, Viscose Staple Fibre used in the manufacture of the final product should be considered a Modvatable input even before 21-10-94.

2. Reference was made to the case of Mettur Spinning Mills, where Polyester Staple Fibre used in manufacturing Polyester Cotton Blended Yarn was considered a Modvatable input for the final product. It was established that no duty was leviable on carded/combed cotton, the intermediate product specified as a final product under Rule 57A from 21-10-94 onwards. The Tribunal's decision in the Mettur Spinning Mills case was upheld by the High Court, confirming the view that the fibre used in manufacturing the final product qualified as a Modvatable input.

3. Consequently, the Tribunal upheld the impugned order of the Commissioner (Appeals), which granted input duty credit to the respondents for using Viscose Staple Fibre in manufacturing the final product during the relevant period. The appeal by the Revenue was dismissed, affirming the respondents' entitlement to Modvat credit for the input used in the production process.