2000 (11) TMI 254 - AT - Central Excise

Summary

Issues:
1. Interpretation of rules 57C and 57CC under the Modvat Scheme.
2. Application of duty on sulphuric acid captively consumed without payment.
3. Compliance with sub-rule (9) of rule 57CC.
4. Reversal of Modvat credit on inputs used in manufacturing.

Analysis:

1. The case involved the interpretation of rules 57C and 57CC under the Modvat Scheme. Rule 57C mandates the reversal of credit if the final product is not dutiable or attracts nil duty. On the other hand, rule 57CC allows retention of credit if 8% duty is paid on final products capable of being cleared without payment of duty.

2. The issue of duty on sulphuric acid captively consumed without payment arose as the appellants used inputs like caustic soda and vanadium pentoxide, which had suffered duty, in manufacturing sulphuric acid. Some of the sulphuric acid was used for dutiable goods, leading to a demand for duty payment under rule 57CC.

3. The Assistant Commissioner's order highlighted the importance of complying with sub-rule (9) of rule 57CC for attracting the demand under the said rule. The demand for duty was based on the introduction of rule 57CC in September 1996, covering the period of February - March 1998.

4. The case also dealt with the reversal of Modvat credit on inputs used in manufacturing. The appellants had reversed the credit on caustic soda and vanadium pentoxide under the Modvat Scheme, even when part of the resulting sulphuric acid was used for manufacturing dutiable goods. The authorities' failure to consider the appellants' reversal of credit led to a misinterpretation of rules 57C and 57CC.

In conclusion, the appellate tribunal found that the demand for duty on the appellants was unwarranted as they had not taken any unwarranted benefit under rules 57C and 57CC. The tribunal allowed the appeal, emphasizing that the revenue should not receive double benefit and directed the Assistant Commissioner to examine the reversals made by the appellants of the Modvat credit taken.