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2015 (5) TMI 628 - SC - Central ExciseValidity of order of settlement of commission - MODVAT Credit - use of inputs for manufacturing activity or not - respondent made an admission to the extent that it had received the float glass in packaged form and on the opening of the wooden boxes, certain float lasses were found to be broken and they were not used as inputs while undertaking the manufacturing process - Held that - High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, the facts noted above remained undisputed. On those facts the High Court has simply stated the correct legal position where the Settlement Commission had gone wrong in law. Thus, the High Court has simply applied the correct principle of law on the admitted facts. - Such remand of the High Court has been held permissible in Jyotendrasinghji vs. S.I. Tripathi and Others (1993 (4) TMI 1 - SUPREME Court) which was also concerning the powers of the Settlement Commission, albeit under Section 245(D)(4) of the Income Tax Act. The principle of law remains the same and can be applied in case of orders passed by the Settlement Commission under the Central Excise Act as well - appeal is bereft of any merit - Decided against Revenue.
Issues involved:
1. Interpretation of modvat credit under Rule 57A of the Central Excise Rules, 1944. 2. Jurisdiction of the High Court to review Settlement Commission's order under Article 226 of the Constitution. 3. Application of legal principles in determining eligibility for modvat credit on defective inputs. Detailed Analysis: 1. The judgment involved a dispute regarding the modvat credit availed by a respondent engaged in manufacturing Toughened and Laminated Safety Glass for Automobiles. The respondent had availed modvat credit on defective float glass used as raw material. The Settlement Commission directed the respondent to pay back a certain amount towards the duty claimed on defective inputs. The respondent challenged this decision, arguing that the entire sheet of glass was not wasted as some parts were used in the manufacturing process. The High Court accepted the respondent's plea, remanding the case back to the Settlement Commission for reconsideration based on legal principles. 2. The Department appealed against the High Court's decision, contending that the High Court exceeded its jurisdiction by reviewing the Settlement Commission's order under Article 226 of the Constitution. The Department argued that the Settlement Commission's order should not have been re-evaluated by the High Court. However, the Supreme Court disagreed with this argument, stating that the High Court did not interfere with the factual aspects recorded by the Settlement Commission. The Supreme Court upheld the High Court's decision to remand the case for fresh consideration by the Settlement Commission. 3. The High Court's analysis focused on the interpretation of Rule 57A of the Central Excise Rules and the eligibility of defective inputs for modvat credit. The High Court found that the Settlement Commission had erred in considering even the float glass used in the manufacturing process as wasted input due to defects. The High Court referenced legal precedents to support its conclusion that the manufacturing process starts when the raw material undergoes essential operations. Additionally, the High Court interpreted Rule 57D and Rule 57A (4) to support its legal position. The Supreme Court concurred with the High Court's interpretation of the law and upheld the remand for fresh consideration by the Settlement Commission. In conclusion, the Supreme Court dismissed the Department's appeal, affirming the High Court's decision to remand the case for reconsideration by the Settlement Commission. The judgment clarified the legal principles governing modvat credit on defective inputs and emphasized the importance of correct interpretation of rules in such cases.
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