1993 (6) TMI 96 - AT - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the Regional Bench vs. Special Bench.
2. Correctness of Modvat Credit availed by the appellants.
3. Classification of inputs and the duty rate applicable.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Regional Bench vs. Special Bench:

The primary question referred to the Larger Bench was whether jurisdiction lies with the Regional Bench or the Special Bench in the context of the dispute regarding availing of Modvat Credit on inputs by the appellants. The North Regional Bench (NRB) initially transferred the matter to the Special Bench, concluding that apart from Modvat, issues regarding classification and rate of duty were involved. However, the Special Bench later determined that the issue did not involve the rate of duty or assessable value, thus falling under the jurisdiction of the Regional Bench. The Larger Bench ultimately held that the issue was not one having relation to the rate of duty or assessable value; therefore, the jurisdiction would lie with the NRB only and not with the Special Bench.

2. Correctness of Modvat Credit availed by the appellants:

The dispute arose from the appellants availing Modvat Credit against gate passes for materials described as strips, round cuttings, bars, hoops, etc., which differed from the inputs declared as melting scrap for the manufacture of steel ingots. The Assistant Collector disallowed the Modvat Credit, asserting that the materials received were finished products, not melting scrap. The appellants contested this decision, producing a certificate from the supplier (Hero Honda Motors) stating that they paid duty under protest as per instructions from their jurisdictional Assistant Collector. The Larger Bench noted that the dispute was at the supplier's end regarding the classification of the material and that the Modvat Scheme under Rule 57E provides for adjustment of credit in such situations. Therefore, the user manufacturer cannot raise the classification issue.

3. Classification of inputs and the duty rate applicable:

The Assistant Collector and the lower authorities found discrepancies between the declared inputs and the actual materials received, leading to the disallowance of Modvat Credit. The appellants argued that the materials were indeed melting scrap, and the duty was paid at a higher rate under protest. The Larger Bench observed that the classification dispute was at the supplier's end and that the Modvat Scheme allows for adjustments in credit through Rule 57E. The Vice President, however, dissented, emphasizing that Modvat provisions are interlinked with other aspects of the Central Excise system, and the classification and rate of duty are directly related to the identity of the goods. He argued that the Assistant Collector must ensure the correct rate and quantum of duty, and such disputes fall within the jurisdiction of the Special Benches.

Separate Judgment by Vice President:

The Vice President dissented from the majority view, arguing that Modvat provisions are not entirely independent and are interlinked with the Central Excise system. He emphasized that the classification and rate of duty are directly related to the identity of the goods, and the Assistant Collector must ensure the correct rate and quantum of duty. He concluded that disputes involving classification and rate of duty fall within the jurisdiction of the Special Benches.