2004 (1) TMI 148 - AT - Central Excise

Summary

Issues:
1. Whether Modvat credit on Crude Glycerine should be proportionately reduced due to insoluble residue not being used in the manufacturing process of finished goods.

Analysis:
The appellants received Crude Glycerine in tankers for manufacturing Refined Glycerine. The impurity in Crude Glycerine settled down as insoluble residue during transit, which was washed out inside the factory. The issue revolved around whether the Modvat credit should be reduced proportionately due to the insoluble residue not being utilized in the manufacturing process. The appellants argued they were entitled to full credit as duty was paid on the entire consignment, including the part becoming residue. They cited the Apex Court's decision that handling raw materials is part of the manufacturing process, supporting their claim for full credit. Previous cases were also referenced where full credit was allowed despite reduction in input weight during transit.

The ld. DR justified the lower authorities' orders by emphasizing that the finished goods were Refined Glycerine, with Crude Glycerine being the input, not the residue. Referring to a previous Tribunal decision, it was argued that input duty credit should only consider the actual quantity of inputs received. However, after considering arguments from both sides, perusing case records and laws cited, the Member (T) concluded that since duty was paid on the entire consignment of Crude Glycerine, including the insoluble residue, the appellants were entitled to the full duty credit. Rule 57D(1) was invoked, stating that credit shall not be denied even if part of the input becomes waste. The Apex Court's decision supporting the inclusion of handling raw materials in the manufacturing process further strengthened the appellants' case. Consequently, the impugned order was set aside, and the appeal was allowed, granting consequential benefits to the appellants.