2002 (1) TMI 94 - AT - Central Excise

Summary

Issues:
- Entitlement to avail Modvat credit on input used in broken ceramic glazed tiles.
- Classification of broken tiles as marketable goods and excisability.
- Application of Supreme Court decision in CCE v. M/s. Gayatri Glass Works.
- Exemption under Notification No. 139/90-C.E. for broken tiles.
- Interpretation of Rule 57D of the Central Excise Rules for Modvat credit.

Entitlement to Modvat Credit:
The issue revolved around whether manufacturers of ceramic glazed tiles could avail Modvat credit on inputs used in broken tiles. The Commissioner (Appeals) allowed the benefit based on previous Tribunal decisions. The Revenue challenged this, arguing that broken tiles are marketable goods and excisable. The Revenue also cited a Supreme Court decision for reconsideration. The Tribunal noted that the broken tiles were sold by weight at a fractional value, constituting waste material. Previous Supreme Court dismissals of Revenue appeals supported the view that broken tiles were not excisable.

Classification of Broken Tiles:
The Revenue contended that broken tiles were marketable goods, citing an exemption for them under Notification No. 139/90. However, the Tribunal found that the broken tiles were treated as scrap and exempted accordingly. The Tribunal held that the broken tiles did not have the same characteristics as glazed tiles and were not liable for excise duty.

Application of Supreme Court Decision:
The Revenue sought to apply a Supreme Court decision regarding molten and broken glass to the case of broken tiles. However, the Tribunal found no evidence that broken tiles were sold for considerable value or could be recycled for manufacturing glazed tiles. Thus, the Supreme Court decision was not applicable to the present case.

Exemption under Notification No. 139/90-C.E.:
The Tribunal analyzed the exemption granted under Notification No. 139/90 for broken tiles, emphasizing that it applied to tiles treated as scrap and not usable as tiles. The Assistant Collector's satisfaction with the nature of the broken tiles led to the grant of exemption, reinforcing that broken tiles were not marketable goods.

Interpretation of Rule 57D for Modvat Credit:
The Revenue argued against granting Modvat credit based on Rule 57D, claiming the word "scrap" was not explicitly used in the rule. The Tribunal disagreed, equating "scrap" with "waste" in commercial terms. Previous Tribunal decisions supported this interpretation, allowing Modvat credit for inputs used in scrap. As the broken tiles were considered scrap, the Tribunal upheld the respondents' claim for Modvat credit under Rule 57D.

In conclusion, the appeals filed by the Revenue were dismissed, affirming the entitlement of manufacturers to avail Modvat credit on inputs used in broken ceramic glazed tiles and establishing that broken tiles were not marketable goods liable for excise duty.