2004 (9) TMI 255 - AT - Central Excise

Summary

Issues:
Whether the benefit of Notification No. 3/2001-C.E., dated 1-3-2001, is available for vacuum gas filled bulbs of retail price not exceeding Rs. 20/- per bulb.

Analysis:

The appeal filed by M/s. Arya Filaments (P) Ltd. revolves around the eligibility for the benefit of Notification No. 3/2001-C.E. concerning vacuum gas filled bulbs. The company manufactures tungsten wire, tungsten filament, and vacuum gas filled bulbs, availing Modvat credit on inputs used in the manufacturing process. The dispute arises from the Commissioner disallowing the exemption under the notification, alleging that the company is availing input stage credit. The company argues that despite using inputs for tungsten filament, which is a separate product, they should still qualify for the exemption for vacuum gas filled bulbs.

In response to the company's arguments, it is contended that since the company avails Modvat credit on inputs used for tungsten filament, which is then used in the production of bulbs, they are not eligible for the concessional rate of duty under the notification. The central issue is whether the Modvat credit availed on inputs for tungsten filament should disqualify the company from the notification's benefits for vacuum gas filled bulbs.

The Tribunal examined both parties' submissions and concluded that the Modvat credit taken on inputs used in tungsten filament, which is subsequently utilized in bulb manufacturing, renders the company ineligible for the notification's benefits. The Tribunal referenced a previous case involving steel castings to support its decision, highlighting that inputs used in a separate manufacturing stream but contributing to the final product's production are deemed part of the manufacturing process. Drawing from Supreme Court precedents, the Tribunal affirmed that inputs used in tungsten filament production are integral to the bulb manufacturing process, thereby disqualifying the company from the notification's benefits.

Ultimately, the Tribunal upheld the duty demand confirmed by the Commissioner, as the company failed to meet the notification's conditions due to availing Modvat credit on inputs. However, the penalty imposed on the company was set aside since they had claimed the notification's benefit in their classification declaration. Therefore, the appeal was disposed of with the duty demand upheld and the penalty lifted.