2007 (5) TMI 13 - HC - Central Excise

Cenvat/Modvat Appellant contended that credit should not be disallowed in respect of the gas which gets in the atmosphere Held that contention of the appellant correct

Summary

Issues:
1. Disallowance of Modvat credit for gas evaporation during manufacturing process.
2. Interpretation of Rule 57D of the Central Excise Rules, 1944.

Analysis:
1. The case involved a dispute regarding the disallowance of Modvat credit for the evaporation of nitrogen and liquid argon during the manufacturing process. The Assistant Commissioner initially ruled against the Assessee, but the Commissioner (Appeals) set aside the order, stating that the evaporation of gases does not amount to waste and, therefore, disallowance under Rule 57D was incorrect.

2. The Revenue then appealed to the Tribunal, which also dismissed the appeal. Rule 57D(1) of the Central Excise Rules, 1944 was cited, which states that credit of specified duty shall not be denied on the ground that part of the inputs is contained in waste, refuse, or by-product arising during the manufacture of the final product. The Tribunal upheld the decision that the loss of nitrogen/liquid argon due to evaporation does not fall under waste, refuse, or by-product arising during manufacturing.

3. The High Court, in its judgment, highlighted the distinction between waste, refuse, or by-product arising during manufacturing and natural consequences like evaporation. The Court agreed with the Tribunal's interpretation that the evaporation of gases is a natural consequence of the manufacturing activity and does not fall under the purview of Rule 57D. Therefore, the Court upheld the Tribunal's decision and dismissed the appeal, stating that no substantial question of law arises for consideration in this case.