2003 (3) TMI 160 - AT - Central Excise

Summary

Issues:
1. Availability of Modvat credit of duty paid on inputs to M/s. Rochi Ram & Sons.

Analysis:
The issue in these appeals is whether Modvat credit of duty paid on inputs is available to M/s. Rochi Ram & Sons. The appellant-firm manufactures wrist watches and avails Modvat credit of duty paid on inputs. The watches with a retail price below Rs. 500 per piece were exempted from duty payment. The Commissioner demanded Cenvat credit availed on inputs used in the manufacture of exempted goods and imposed penalties, alleging a violation of Rule 57AD(1). The appellant argued that they intended to manufacture both dutiable and exempted watches, and maintained consolidated records due to common usage of inputs. They paid 8% of the value of exempted watches at clearance, indicating compliance with Rule 57AD(2).

The demand related to inputs in stock on 1-4-2000 and those received until 31-8-2000. The appellant contended that credit already availed could not be recovered, citing precedents. Inputs received after 1-4-2000 were also disputed, with the appellant claiming compliance through debiting amounts in RT-12 filings. The appellant challenged the imposition of penalties.

The Revenue argued that Rule 57AD(1) applied as the appellant only manufactured exempted watches during the relevant period, precluding Cenvat credit. They contended that Rule 57AD(2) required simultaneous manufacturing of both dutiable and exempted goods for availing benefits, which the appellant did not meet. Precedents were cited to support the Revenue's position.

The Tribunal analyzed Rule 57AD, noting the requirement to maintain separate accounts for dutiable and exempted goods under sub-rule (2). The appellant's contention that they manufactured both types of watches using the same inputs was accepted. The Tribunal found no substance in the Revenue's argument that the appellant did not manufacture dutiable watches during the relevant period. The appellant's intention to manufacture both types of watches was supported by documentary evidence. As Rule 57AD(2) does not mandate daily production of both types of goods, the Tribunal ruled in favor of the appellant, allowing the appeals.

In conclusion, the Tribunal held that the appellant was entitled to avail Cenvat credit as they intended to manufacture both dutiable and exempted watches, even though only exempted watches were produced during a specific period. The Tribunal found no violation of Rule 57AD and allowed the appeals, overturning the Revenue's disallowance of Cenvat credit to the appellant.