2011 (7) TMI 873 - AT - Central Excise

MODVAT credit - The allegation of the department is that the respondent did not file a proper declaration as required under Rule 57G(2) of the Central Excise Rules 1944 and the respondent cleared the inputs to the job workers without obtaining permission from the concerned authorities - The learned SDR pointed out that they had not declared the final product i.e. the container in the declaration under Rule 57G - Appeal is dismissed

Summary

Issues:
1. Interpretation of Rule 57G(2) of the Central Excise Rules, 1944.
2. Validity of MODVAT credit on duty paid inputs.
3. Requirement of declaration for removal of goods to job workers.
4. Classification of final products as intermediate products.

Analysis:
1. The appeal before the Tribunal arose from an order of the Hon'ble Bombay High Court remanding the matter for fresh consideration. The respondent, engaged in manufacturing wet detergent tissues, had taken MODVAT credit on duty paid inputs but was alleged to have not filed a proper declaration as per Rule 57G(2) of the Central Excise Rules, 1944. The lower adjudicating authority confirmed a demand and imposed a penalty, which was challenged by the respondent before the Commissioner (Appeals), who allowed the appeal. The Revenue then appealed to the Tribunal, which initially dismissed the appeal on technical grounds. However, the matter was remanded back to the Tribunal by the High Court for reconsideration.

2. The contention of the Revenue was that the respondent did not disclose the final product in the declaration and did not obtain permission for removing goods to job workers under Rule 57. The respondent argued that their final products were wet detergent tissue papers, not plastic containers, and that the plastic containers were intermediate products. They claimed that credit of duty paid on plastic granules used for making containers was admissible under Rule 57A, citing relevant precedents to support their position.

3. The Tribunal, after considering the submissions and perusing the records, noted that the Note Sheet produced by the Revenue contained the expression 'not legal and correct,' which was crucial in deciding the case on its merits. The Collector (Appeals) had found that the inputs were declared in the final product as detergent paper, not containers. Referring to legal precedents, including the decision in the case of Ponds (India) Ltd., the Tribunal held that plastic containers were to be treated as intermediate products. As there was no dispute that inputs sent for job work were received back and final products were cleared on payment of duty, the Tribunal upheld the Commissioner (Appeals) order, dismissing the Revenue's appeal.

4. In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, emphasizing that the duty payable on final products did not warrant denial of MODVAT credit on inputs used for their manufacture. The judgment clarified the classification of final products as intermediate products and affirmed the admissibility of credit on duty paid inputs in line with relevant legal interpretations and precedents.