2004 (2) TMI 242 - AT - Central Excise

Summary

Issues involved: Whether Modvat credit of duty paid on inputs is available to a company for processes not amounting to manufacture.

Analysis:
1. The main issue in this appeal is whether the company, engaged in processes like dipping handles in acetone, magnetizing blades, and treating screwdrivers with rust-preventing oil, is eligible for Modvat credit on duty paid for inputs. The Departmental Representative argues that these processes do not result in a new commercial product distinct from the inputs, citing legal precedents. They contend that the company does not manufacture a new product, hence not entitled to Modvat credit.

2. On the contrary, the company's Advocate argues that the processes transform the semi-finished screwdrivers into a finished product, which is accounted for and cleared after paying duty. They assert that if the processes do not amount to manufacture, no Central Excise duty can be levied. Additionally, they cite Rule 57F(4) of the Central Excise Rules, allowing credit utilization on input clearance. The Advocate relies on a legal case to support their argument.

3. The Tribunal considers both arguments and notes that the screwdrivers, post-processes, are cleared after paying duty. It emphasizes that if duty is collected on the cleared product, it cannot be claimed that the processes do not amount to manufacture. Referring to Section 3 of the Central Excise Act, the Tribunal states that duty is levied on goods produced or manufactured in India. It also acknowledges the relevance of Rule 57F(4) allowing input removal with credit reversal. Based on these considerations, the Tribunal finds no merit in the Revenue's appeal and rejects it.