2001 (2) TMI 226 - AT - Central Excise

Summary

Issues Involved:
1. Admissibility of Modvat credit u/r 57C of the Central Excise Rules.
2. Applicability of Notification 214/86-C.E. in relation to Rule 57C.
3. Interpretation of Tribunal decisions in similar contexts.

Summary:

1. Admissibility of Modvat credit u/r 57C of the Central Excise Rules:
The appellants, a division of Jindal Polyester Ltd., engaged in manufacturing polyester/polymer chips, received inputs from M/s. Jindal Polyester Ltd. and availed Modvat credit on certain inputs. The Department contended that credit was not admissible as Rule 57C prohibits Modvat credit on inputs used in the manufacture of final products cleared at nil rate of duty unless Rule 57CC is followed. The adjudicating authority upheld this view, disallowing credit of Rs. 44,91,828/- and imposing a penalty of equal amount along with interest at 18%.

2. Applicability of Notification 214/86-C.E. in relation to Rule 57C:
The appellants argued that the removal of polyester chips without payment of duty was permissible u/r 57F(4), which is a self-contained provision, and thus Rule 57C's mischief was not attracted. They cited Tribunal decisions in similar contexts, asserting that Notification 214/86 is not hit by Rule 57C. The Department countered that the appellants were operating under Notification 214/86 and that Modvat credit is not admissible for inputs used in the manufacture of final products cleared free of duty under an exemption notification.

3. Interpretation of Tribunal decisions in similar contexts:
The Tribunal examined the applicability of the Bajaj Tempo Ltd. decision, which dealt with Notification 217/86, and found it relevant. In Bajaj Tempo, the Tribunal held that Notification 217/86 should be harmoniously construed with Rule 57C to avoid duty payment at each stage and postpone credit availment to the final stage of manufacture. Applying this principle, the Tribunal concluded that the appellants were entitled to Modvat credit, as the polyester/polymer filament yarn was cleared on payment of duty by the parent manufacturer.

Conclusion:
The Tribunal set aside the denial of credit and the imposition of penalty, allowing the appeal with consequential relief, based on the principle that Notification 214/86 should be interpreted similarly to Notification 217/86, extending the chain of credit to the final product cleared on payment of duty. The appeal was allowed on this ground, and no findings were recorded on other arguments raised by the appellants.