2001 (11) TMI 1053 - AT - Central Excise

Summary

Issues involved:
1. Utilization of Modvat credit on Additional Excise Duty (AED) towards payment of Basic Excise Duty (BED) on final products.
2. Interpretation of Rule 57F (12) in the context of utilizing credit for payment of duty on final products.

Analysis:

Issue 1: Utilization of Modvat credit on AED towards BED on final products
The case involved a company engaged in manufacturing nylon products and utilizing Modvat credit under the scheme. The dispute arose when the department questioned the company's utilization of AED credit towards payment of AED on unprocessed fabrics. The Commissioner (Appeals) dismissed the appeal, citing a previous decision and holding that credit earned on BED cannot be used towards AED. However, the appellant argued that Modvat credit on AED can be utilized for payment of BED on final products. The Tribunal referred to a judgment in Modi Rubber Ltd. case where it was held that Rule 57F (12) permits the utilization of AED credit for payment of BED on final products. Following this precedent, the Tribunal set aside the Commissioner's order and allowed the appeal, directing the department to permit the company to use accumulated Modvat credit on AED towards payment of BED/AED on any final product produced in their factory.

Issue 2: Interpretation of Rule 57F (12) for credit utilization
The Tribunal analyzed Rule 57F (12) in detail, emphasizing the 'non obstante' clause and the enacting clause. It noted that the credit of AED paid on tyre-cord fabric was being utilized for paying BED on tubes, even though the fabric was not used as an input in tube manufacturing. The Tribunal found that all requirements of the enacting clause of Rule 57F (12) were met, allowing for the credit utilization. This interpretation was consistent with the decision in Modi Rubber Ltd. case and was followed in the Madura Coats Ltd. case. Consequently, the Tribunal set aside the Commissioner's order and directed the department to allow the appellant to use the Modvat credit on AED towards duty payment on final products.

In conclusion, the Tribunal's judgment clarified the permissible utilization of Modvat credit on AED towards BED on final products, based on the interpretation of Rule 57F (12) and established precedents. The decision emphasized compliance with the enacting clause of the rule, ensuring that the appellant could benefit from the accumulated credit for duty payments on their manufactured goods.