2015 (12) TMI 739 - SC - Central Excise

Modvat / Cenvat Credit - Benefit of Rule 57A(4) of the Central Excise Rules - whether the inputs which was used were for the final products or not - Held that - Insofar as sealing strips are concerned, they are not used by the assessee in the manufacture of aseptic packaging - Appeal preferred by the Department before the High Court has been dismissed solely on the ground that no question of law arises. We do not agree with the aforesaid observations of the High Court as according to us, question of law clearly arises which had to be determined by the High Court. We, thus, set aside the impugned judgment and remand the case back to the High Court - Appeal disposed of.

Summary

Issues:
Interpretation of Rule 57A(4) of the Central Excise Rules regarding the allowance of credit for specified duty on inputs used in the manufacture of final products or in relation to the manufacture of final products.

Analysis:
The Supreme Court addressed the issue of whether the respondent-assessee could avail the benefit of Rule 57A(4) of the Central Excise Rules. The rule allows credit for specified duty on inputs used in the manufacture of final products or in relation to the manufacture of final products. The question arose as to whether the inputs used were for the final products or not. The Commissioner's order highlighted that the assessee was not manufacturing aseptic packages but aseptic packaging paper, which was further used by downstream customers to manufacture tetra packs. The sealing strips in question were not used in the manufacture of aseptic packaging paper but by downstream users to make the packages leak-proof. The Tribunal had ruled in favor of the assessee, but the High Court dismissed the appeal by the Department on the grounds that no question of law arose. The Supreme Court disagreed with this observation, stating that a question of law indeed existed, requiring determination by the High Court. Consequently, the Supreme Court set aside the judgment and remanded the case to the High Court for a fresh decision on the legal question at hand.

The Supreme Court clarified that it did not express any opinion on the matter and disposed of the appeal accordingly. This case underscores the importance of correctly interpreting and applying statutory provisions, such as Rule 57A(4) of the Central Excise Rules, to determine the eligibility of credits for specified duties on inputs used in the manufacturing process. The decision emphasizes the need for a thorough examination of the facts and evidence to ascertain whether the inputs are directly or indirectly related to the final products, highlighting the significance of legal interpretation in tax matters to ensure fair and just outcomes for all parties involved.