2002 (8) TMI 863 - AT - Central Excise

Summary

Issues:
Entitlement to avail modvat credit for pig iron used in the manufacture of mould boxes captively consumed in the production of C.I. Castings removed without duty payment under Rule 57F(3).

Analysis:
The primary issue in this appeal was the entitlement of the appellants to claim modvat credit for pig iron used in the production of mould boxes, which were further captively consumed in manufacturing C.I. Castings without duty payment under Rule 57F(3). The Tribunal referred to the precedent set by the Larger Bench in the case of Shri Ramakrishna Steel Industries Ltd. v. CCE, Madras, where it was established that inputs used in the manufacture of products exempted due to captive consumption are still eligible for credit. By applying this precedent, the Tribunal concluded that the pig iron used in the mould boxes should be considered eligible input for modvat credit.

Another objection raised by the Revenue was that the appellants were using the moulds in the production of C.I. Articles, which were being removed without duty payment, invoking Rule 57C. However, the appellants argued that they were operating under a job-work scheme as per Rule 57F(3), supplying the C.I. Articles to the Principal manufacturer who paid duty on the final product. Citing the Tribunal's decision in Jindal Polymers v. CCE, Meerut III, it was emphasized that modvat credit cannot be denied to job workers if the Principal factory pays duty on the final product, ensuring the continuity of the credit chain. The Tribunal's decision in Bajaj Tempo Ltd. was also referenced to support this argument, extending the chain of credit up to the stage where duty is paid on the final product.

Furthermore, the Tribunal cited the case of Deccan Alloys Ltd. v. CCE, Chennai, which affirmed that job workers should not be denied modvat credit if duty on the final product is paid by the Principal manufacturer. In the present case, the appellants provided a declaration from the Principal manufacturer confirming the liability to pay duty on the final product, ensuring the uninterrupted chain of modvat credit. Consequently, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellants.