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2005 (1) TMI 172 - AT - Central Excise
Issues: Appeal against O-I-As No. 37/2003-C.E. & 38/2003-C.E. regarding reversal of Modvat credit attributable to waste.
Analysis: 1. The appellants, who manufactured tread rubber, opted out of Modvat Scheme with effect from 1-4-2000 as per Notification No. 8/2000. They reversed the Modvat credit attributable to inputs in stock and finished goods but not in waste. The revenue contended that Modvat credit in waste should also be reversed. 2. The Original Authority held that the appellants were not required to reverse the Modvat credit contained in the waste. The authority reasoned that under Rule 57D of Central Excise Rules, credit of duty contained in waste arising during manufacture shall not be denied. The authority also cited Section 38A of Central Excise Act to support the decision. 3. The revenue challenged the Original Authority's decision before the Commissioner (Appeals), who set aside the decision. The Commissioner held that since the appellants cleared vulcanized waste on payment of duty till 31-3-2000, they were required to reverse credit on finished goods and inputs, including waste, upon opting out of Modvat Scheme. 4. The appellants appealed to the Appellate Tribunal, arguing that they were only obligated to reverse credit on inputs in stock and finished goods as per Rule 57AG. They relied on Rule 57D, which protected credits on inputs contained in waste until 31-3-2000. The appellants also referenced a CEGAT decision supporting their position. 5. The Tribunal analyzed the provisions and precedents cited. It noted that under Rule 57D, Modvat credit on inputs could not be denied based on their presence in waste. Upon opting out of the Modvat scheme, the appellants were only required to reverse credit on inputs in stock and finished goods, not waste. The Tribunal upheld the Original Authority's decision, citing the Darshan Agro Oils Ltd. case as a precedent. Consequently, the Tribunal allowed the appeal, finding the Commissioner (Appeals) orders unsubstantiated.
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