1989 (8) TMI 146 - AT - Central Excise

Summary

Issues:
1. Disallowance of credit for certain inputs under the MODVAT Scheme.
2. Interpretation of Central Excise Rule 57H regarding credit of duty paid on inputs.
3. Applicability of restrictions on credit under Rule 57H(2) for inputs paid before 31-1-1986.
4. Eligibility of imported gum rosin as an input under the MODVAT Scheme.
5. Availability of credit for excise duty paid on inputs other than gum rosin.

Analysis:
The case involved the disallowance of credit for specific inputs under the MODVAT Scheme by the Assistant Collector of Central Excise, which was later overturned by the Collector (Appeals), leading to an appeal by the Collector of Central Excise, Nagpur. The respondents, a paper manufacturer, declared various inputs for credit under Rule 57A, with the dispute focusing on imported gum rosin, dye direct brown 'MR', dye bismark brown 'R', and sodium hexameta phosphate. The Tribunal considered the applicability of Rule 57H, which allowed credit for inputs received on or after 1-3-1987 or used in final products cleared after that date, subject to restrictions in sub-rule (2).

The Tribunal analyzed the eligibility of imported gum rosin as an input, noting that the additional duty of customs paid on it before 1-3-1986, as per Item No. 68 of the repealed Tariff Schedule, barred credit under the proviso to Rule 56A(2). The appellant's argument that the gum rosin was ineligible due to the duty payment was accepted, contrary to the respondents' claim that Rule 57H(2) did not apply to inputs in stock on 1-3-1987. The Tribunal emphasized the plain reading of the proviso supporting the appellant's logical interpretation.

Regarding the other three inputs, the Tribunal upheld the appellant's contention that excise duty was paid before 31-3-1986, making credit inadmissible under Rule 57H(2) as no rule or notification allowing credit before 1-3-1986 was presented by the respondents. As a result, the Tribunal set aside the previous order and allowed the appeal, affirming the disallowance of credit for the inputs in question. The judgment highlights the strict application of rules and provisions under the MODVAT Scheme in determining the admissibility of credit for excise duty paid on inputs used in manufacturing processes.