1988 (3) TMI 266 - AT - Central Excise

Summary

Issues:
- Appeal against rejection of MODVAT credit under Rule 57H
- Interpretation of Rule 57H(2) regarding credit of duty paid on inputs
- Applicability of transitional provisions for MODVAT credit
- Consideration of countervailing duty paid on chemicals as input

Analysis:
The appeal was filed against the rejection of MODVAT credit under Rule 57H of the Central Excise Rules, 1944. The appellant imported chemicals falling under Chapter 39 of the Central Excise Tariff, 1985 and sought MODVAT credit for countervailing duty paid on these chemicals. The original authority and the Collector of Central Excise (Appeals) had denied the credit, which was confirmed in the impugned order. The appellant argued that the chemicals were inputs, and credit should be allowed under Rule 57H(2) since the duty was paid after January 31, 1986. The key issue was the interpretation of Rule 57H(2) and its application in this case.

The Tribunal analyzed Rule 57H(2), which states that no credit of duty paid on inputs used in manufacturing a final product shall be allowed if duty was paid on the inputs on or before January 31, 1986. However, an exception exists for inputs where credit was allowable before March 1, 1986. In this case, the chemicals imported had countervailing duty paid on them, which was admissible for MODVAT credit under Rule 57A. The chemicals were used as inputs in manufacturing Resins. The Tribunal noted that the countervailing duty on these chemicals was not previously creditable under any rule or notification. Therefore, the Tribunal held that the countervailing duty paid on chemicals would be allowable as credit only after January 31, 1986.

The Tribunal considered that MODVAT credit was available for duty-paid inputs in stock as of March 1, 1986, under Rule 57H(1)(a). Given that MODVAT credit was available for chemicals from March 1, 1986, onwards, the Tribunal concluded that the appellant should be entitled to MODVAT credit for the countervailing duty paid on the chemicals used in manufacturing Resin. The impugned order was set aside, and the appeal was allowed in favor of the appellant.