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2002 (2) TMI 282 - AT - Central Excise
Issues:
1. Availment of Modvat credit for glass bottles not utilized in manufacturing pharmaceutical products. 2. Discrepancy in the utilization of glass bottles and Modvat credit availed. 3. Reversal of Modvat credit for broken bottles during manufacturing process. 4. Applicability of Rule 57D regarding reversal of Modvat credit for broken bottles. 5. Dispute over the duty liability and penalty imposed. Analysis: 1. The appellant, engaged in manufacturing pharmaceutical products, availed Modvat credit for glass bottles but faced a show cause notice for not utilizing the bottles equivalent to the credit availed. The adjudicating authority confirmed a duty amount and penalty, which was upheld by the Commissioner (Appeals), leading to the present appeal. 2. The appellant argued that broken bottles received in a damaged condition were not entered into manufacturing registers and thus, the reversal of credit for such bottles was justified. However, for bottles broken after issuance to the manufacturing section, the appellant relied on a Tribunal decision to support their case. 3. The appellant admitted to reversing credit for bottles received in a damaged state but disputed the reversal for bottles broken during the manufacturing process. The authorities suspected a high breakage rate, but the appellant argued that the shortage percentage was not excessive based on production and issuance records. 4. The Tribunal found merit in the appellant's argument and directed the original adjudicating authority to confirm duty demand only for bottles received in a broken condition, allowing credit for bottles used in manufacturing the final product. The decision emphasized the applicability of Rule 57D for broken bottles during the manufacturing process. 5. The appeal was allowed with directions for quantification, highlighting the importance of distinguishing between bottles broken before and after issuance for manufacturing, ensuring duty liability is imposed only on the latter.
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