1996 (2) TMI 161 - AT - Central Excise

Summary

Issues involved:
The issues involved in the judgment are related to the availing of Modvat credit on inputs used in the manufacture of final products exempted from duty, contravention of provisions of Central Excise Rules, and the applicability of exemption notifications.

Availing of Modvat credit:
The appellants, manufacturers of Aluminium Extrusion Products, had taken Modvat credit on inputs but cleared exempted goods without reversing the credit. The Tribunal considered the argument that the exemption notification allowed both exemption and Modvat credit. However, citing a previous decision, it held that Modvat credit was not allowable for inputs used in manufacturing fully exempted final products. The Tribunal rejected the contention that the exemption notification did not fall under Rule 57C, emphasizing that once goods are cleared fulfilling the exemption condition, they become wholly exempt from duty.

Interpretation of exemption notification:
The Tribunal analyzed the scope of the exemption notification and a trade notice, concluding that the exemption for the final product in question was not optional. The appellants had utilized the credit of duty on inputs for non-exempted goods, contrary to Rule 57C and Rule 57F(4). The demand for duty was deemed consistent with the rules, as the credit utilization did not align with the provisions for duty payment on final products.

Reversal of credit and permissibility:
Referring to a Supreme Court decision, the Tribunal discussed the permissibility of reversing credit entries for duty paid on inputs used in manufacturing exempted goods. The Court's ruling indicated that a manufacturer could make a debit entry before removal of exempted final products, allowing for the deletion of credit entries. However, the Tribunal clarified that the appellant could not avail both Modvat credit and exemption simultaneously.

The Tribunal found no merit in the appeal and dismissed it based on the above considerations.