2007 (3) TMI 134 - HC - Central Excise

Cenvat/Modvat - Alleged that appellant not entitle for credit in respect of the input(fuel) utilize for the manufacturing on job work basis - Held that allegation was not correct and set aside

Summary

Issues:
- Admissibility of Modvat credit on fuel used in manufacturing exempted final products

Analysis:
- The appeal was filed by the Union of India against an order passed by the Customs, Excise and Service Tax Appellate Tribunal. The respondent, a company engaged in manufacturing PET Chips, was availing Modvat credit on various inputs, including fuel used in manufacturing final products.
- Show cause notices were issued to the respondent, alleging that they were manufacturing chips for a sister concern on job work basis and using their own inputs, including fuel on which Modvat credit was availed. The notices proposed disallowance and recovery of amounts related to fuel used for job work.
- The respondent argued that fuel is a specified input for Modvat credit, and the rules regarding inputs used as fuel differ from those for other inputs. They contended that circulars and trade notices regarding job work inputs did not apply to inputs used by the job worker that were not supplied by the principal manufacturer.
- The Deputy Commissioner dropped the proceedings against the respondent, but the Department appealed to the Tribunal, which dismissed the appeal. The Department then filed an appeal before the High Court, questioning the Modvat credit allowed on fuel used for manufacturing exempted final products.
- The High Court analyzed Rule 57C of the Central Excise Rules, which deals with credit not allowed if final products are exempt. The rule specifies conditions for admissibility of credit on inputs used in manufacturing exempted final products, but exempts inputs intended to be used as fuel from certain conditions.
- The Court found that the respondent was manufacturing PET Chips as their final product and using fuel for manufacturing final products on which duty was payable. Therefore, the Court upheld the Modvat credit facility on fuel used by the respondent for manufacturing PET Chips.
- After considering legal provisions and arguments, the Court concluded that the respondent was entitled to Modvat credit on fuel used in manufacturing final products on which duty was payable. The appeal was dismissed, and no costs were awarded.

This detailed analysis covers the issues involved in the legal judgment regarding the admissibility of Modvat credit on fuel used in manufacturing exempted final products.