2003 (2) TMI 512 - AT - Central Excise

Summary

Issues: Availability of Modvat Credit on duty paid goods.

Analysis:
The appeal centered around the availability of Modvat Credit for duty paid goods by M/s. Rico Auto Industries Ltd. The appellant contended that the machining operations undertaken by them should be considered as manufacture, citing the definition under Note 6 to Section XVI and XVII of the Schedule to the Central Excise Tariff Act. They argued that the items became marketable only after these operations, emphasizing that all items were exported under bond. Additionally, they invoked Rule 13 of the Central Excise Rules, asserting that the activities undertaken amounted to manufacture. The appellant also relied on Rule 57F(2) and (12) to support their claim that Modvat Credit should be available even if the processes were not considered as manufacturing. The appellant referenced a tribunal decision and a Board's Circular to strengthen their argument.

The Commissioner had disallowed the Modvat Credit, stating that the processes did not result in a new product. However, the Tribunal, while acknowledging the ambiguity regarding whether the processes constituted manufacture, focused on Rule 57F of the Central Excise Rules. The Tribunal noted that Rule 57F(2) allowed for the removal of inputs for export under bond, a fact undisputed by the Revenue. As the goods were indeed exported under bond, the Tribunal held that the Modvat Credit taken by the appellants could be utilized as per Rule 57F(12). The Tribunal also referred to a Circular by the Central Board of Excise and Customs, clarifying that the clearance of inputs for export under bond should be treated similarly to final products for Credit utilization purposes. Consequently, the Tribunal concluded that the Modvat Credit should not be disallowed to the appellants, overturning the impugned order and allowing the appeal.