2011 (2) TMI 752 - AT - Central Excise

Rule 57B of Central Excise Rules, 1944 - Whether Assessee could took credit of the duty paid by the job-workers under Notification 175/86-CE at the enhanced rate as provided for in para 5 of the said Notification read with Rule 57B of the Central Excise Rules, 1944 or not. - Held that Notwithstanding the exemption granted by notification No. 175/86 dated 01/03/1986, in respect of the specified goods which are subjected to concessional rate of duty (other than those specified goods which are wholly exempted from the duty of excise leviable thereon), under this notification, and used as inputs in the manufacture of final products in terms of the provisions of SECTION AA of Chapter V of the said Rules, the credit in respect of such inputs shall be allowed under rule 57B of the said Rules, at the rate of duty otherwise applicable, but for this notification. - Decided in the favour of Assessee

Summary

Issues:
1. Interpretation of Rule 57F(2) of the Central Excise Rules, 1944.
2. Determination of manufacturer status between raw material supplier and job-workers.
3. Applicability of modvat credit under Rule 57B and Notification No. 175/86.
4. Compliance with the procedure under Rule 57F(2) for duty payment.

Analysis:

Issue 1: Interpretation of Rule 57F(2)
The appeal challenged an order by the Collector of Central Excise, Nagpur, regarding the alleged violation of Rule 57F(2) of the Central Excise Rules, 1944. The appellant contended that the order lacked merit and cited legal precedents to support their argument that following Rule 57F(2) was not mandatory. The Tribunal, in line with previous judgments, emphasized that Rule 57F(2) is a facility and not compulsory, affirming that manufacturers have the discretion to choose whether to adhere to this rule or avail the modvat facility under Rule 57A.

Issue 2: Determination of Manufacturer Status
The dispute centered on determining the manufacturer status between the raw material supplier and the job-workers. Legal references, including judgments by the Bombay High Court and the Supreme Court, established that job-workers are considered manufacturers in their own right. The Tribunal reiterated that the manufacture undertaken by job-workers cannot be attributed to the raw material supplier, emphasizing that the job-workers' clearances should not be combined to determine exemption eligibility under relevant notifications.

Issue 3: Applicability of Modvat Credit
Regarding the applicability of modvat credit under Rule 57B and Notification No. 175/86, the Tribunal highlighted that the duty liability discharged by job-workers under the notification allowed for credit at a higher rate. Citing specific provisions of the notification, the Tribunal concluded that the higher credit availed by the appellant was permissible as per the government's policy to grant such credits.

Issue 4: Compliance with Rule 57F(2) Procedure
The Collector contended that the appellant should have followed the procedure under Rule 57F(2) instead of availing the modvat credit at a higher rate. However, the Tribunal, supported by legal findings and a decision by the Madras Bench, emphasized that manufacturers cannot be compelled to adhere to Rule 57F(2) and have the autonomy to choose the modvat facility under Rule 57A.

In conclusion, the Tribunal set aside the Collector's order, ruling in favor of the appellant and the job-workers, emphasizing the discretionary nature of following Rule 57F(2) and affirming the legality of availing modvat credit under Rule 57B and relevant notifications.