1990 (12) TMI 338 - AT - Central Excise

Summary

Issues:
1. Appeal against the order of the Collector of Central Excise (Appeals) regarding deemed MODVAT Credit withdrawal.
2. Interpretation of MODVAT Credit rules and reversal of credit for inputs lying in stock.

Analysis:
1. The appeal was filed by the Collector of Central Excise, Bangalore against the order of the Collector of Central Excise (Appeals), Madras concerning the withdrawal of deemed MODVAT Credit for certain materials. The Respondents had taken deemed MODVAT Credit for steel rounds, MS Channels, and MS Rounds based on a government order dated 7-4-1986. However, a subsequent order on 2-11-1987 withdrew the deemed MODVAT Credit for these materials. The issue arose when some inputs were still lying in stock for which MODVAT Credit had been taken earlier. The Revenue contended that these inputs should not be eligible for the credit after the withdrawal. The Collector (Appeals) had initially held that the credit need not be reversed, leading to the appeal by the Revenue against this decision.

2. The Revenue argued that the inputs in stock, for which deemed credits were taken, should be rendered ineligible for the credit upon withdrawal. However, the Respondents cited instructions from the Central Board of Excise & Customs, incorporated in a Trade Notice, to support their position. They also referred to a Tribunal decision in another case to strengthen their argument. The Tribunal, in a previous case, had examined a similar issue and concluded that once MODVAT Credit is taken for specified inputs, it cannot be reversed unless there are specific provisions under the MODVAT Rules allowing such reversal. The Tribunal highlighted that the character of goods changes under the MODVAT Scheme once the credit is taken, and removal of such inputs is subject to strict regulations. Therefore, the Respondents were not required to reverse the MODVAT Credit for inputs in stock at the time of withdrawal of deemed credit.

In conclusion, the Tribunal upheld the decision of the lower appellate authority, ruling in favor of the Respondents and dismissing the appeal filed by the Revenue. The judgment emphasized the binding nature of MODVAT Rules once credit is taken, and the stringent procedures governing the usage and removal of inputs under the scheme.