2004 (8) TMI 287 - AT - Central Excise

Summary

Issues:
1. Eligibility of manufacturers to take credit under Rule 57F(7) when goods are received back in the factory.
2. Interpretation of Circular No. 275/109/96-CX regarding credit in PLA account and re-crediting in RG 23A Part II account.
3. Compliance with provisions of law and validity of circulars issued by the Central Board of Excise and Customs.
4. Tribunal's authority to set aside orders based on circulars contrary to rules.

Analysis:
1. The appeal was filed against the order of the Commissioner (Appeals) concerning the eligibility of manufacturers to take credit under Rule 57F(7) when goods are received back in the factory. The appellant argued that credit can be availed when goods are returned either in RG 23A Part II or in PLA as per Rule 57G(7). The contention was that the authorities wrongly disallowed the Modvat credit, and the appeal sought to overturn these decisions.

2. The respondent relied on Circular No. 275/109/96-CX, which clarified that manufacturers can only take credit in the PLA account based on TR-6 challan or specific orders from the proper officer. The Circular emphasized re-crediting in RG 23A Part II account upon return of processed goods, regardless of the initial debit method. The respondent urged the rejection of the appeal based on this interpretation.

3. The Tribunal analyzed Rule 57F(6)(7) in conjunction with Rule 57G(7)(b) to determine the correct procedure for re-crediting duty paid upon the return of reprocessed goods. It was concluded that the appellants acted in accordance with the law by re-crediting the duty amount upon receiving the goods back in the factory. The Tribunal deemed the Circular issued by the Central Board of Excise and Customs as contradictory to the rules and non-binding on the Tribunal, emphasizing that circulars cannot override government-made rules.

4. Ultimately, the Tribunal set aside the orders of the lower authorities, allowing the appeal and providing consequential relief to the appellants. This decision was based on the Tribunal's authority to disregard circulars that conflict with established rules and regulations under the Central Excise Act, 1944.