2002 (11) TMI 215 - AT - Central Excise

Summary

Issues involved: Duty demand on flywheels received for further processes, eligibility for Modvat credit, whether processes amount to manufacture, applicability of Rule 57F(3) and Rule 173H.

Summary:
The appellant, a manufacturer of crankcase and flywheel parts of diesel oil engines, also receives flywheels for additional finishing processes. The Revenue argues that the received flywheels are finished goods, not entitling the appellant to credit of duty paid. The appellant asserts the flywheels are semi-finished, requiring crucial processes before use. The duty demand was initially upheld, stating the flywheels are not inputs. On appeal, it was acknowledged that no new manufacture occurred, but credit adjustment was allowed for duty on finished flywheels under Rule 57F(3), with future regulation under Rule 173H.

The Revenue contends the processes do not constitute manufacture, implying no duty payment by the appellant. Consequently, there would be no need for duty payment or Modvat credit use, rendering the credit entry useless. The Commissioner rightly annulled the demand, as the appellant did not seek duty refund, believing the processes amounted to manufacture. Thus, the credit and duty paid remain unaffected. The Commissioner's directive to follow Rule 173H for future flywheel receipts is advised to prevent future disputes. The appeals are resolved accordingly.