2003 (10) TMI 196 - AT - Central Excise

Summary

Issues involved:
The issue involves whether the respondents, engaged in the manufacture of excisable goods, were required to reverse the Modvat credit of inputs cleared without payment of duty to another factory owned by them, as per Notification No. 217/86.

Summary:
In the present case, the Commissioner (Appeals) allowed the appeals of the respondents against the order denying credit, based on the decision in Bajaj Tempo Ltd. v. C.C.E. The department contended that Rule 57C prohibits taking credit on inputs used in the manufacture of exempted goods and argued that the credit should have been reversed. The department also referred to the decision in Kirloskar Oil Engine v. C.C.E. and highlighted that the matter in Bajaj Tempo was pending before the Bombay High Court under Section 35G of the Act.

The Tribunal analyzed the decision in Bajaj Tempo v. C.C.E., where it was concluded that Notification 217/86 under the Modvat scheme aimed to streamline the process of utilizing Modvat credit on inputs without unnecessary repetition. The Tribunal noted that the notification's scope aligned with the Modvat scheme, emphasizing the efficiency and intended purpose of the scheme.

Regarding Kirloskar Oil Engines v. C.C.E., the Tribunal considered whether disallowing Modvat credit on inputs used in the manufacture of final products cleared without duty under an exemption notification was necessary under Rule 57C. The Tribunal upheld the distinction between Notification 217/85 and 217/86, emphasizing that the latter was issued to advance the Modvat scheme. The Tribunal found no reason to disagree with the decision in Bajaj Tempo and dismissed the appeals, noting that the Bajaj Tempo ratio had been consistently applied by various benches of the Tribunal.

Therefore, the appeals were dismissed, affirming the decision of the Commissioner (Appeals) in favor of the respondents.