2009 (11) TMI 308 - AT - Central Excise

Cenvat credit- A show-cause notice issued to the appellant in February, 2002, the department objected to such availment of Modvat credit and sought to recover the entire credit taken from January to March 1997 amounting to Rs.36,19723/- under Rule 57-I of the Central Excise Rules, 1944 read with the provision to Section 11A(1) of the Central Excise Act. Penalty equal to duty was proposed under Rule 57-1(4) read with Section 1 Interest on duty was demanded under Rule 57- read with Section 1 These demands were contested. In adjudication of the dispute, the learned Commissioner of Central Excise confirmed the demand of duty. Held that- In other words, the raw material was used in the trial run of the plant. It is settled law that raw materials used in the trial production of the final product are inputs for purpose of Modvat/Cenvat credit. In the result, the impugned order is set aside and this appeal allowed.

Summary

Issues:
Denial of Modvat credit and penalty for the period November, December 1996, based on the trial run of the plant and Central Excise registration date.

Analysis:

1. The appellant, M/s. Tetra Pak India Pvt. Ltd., appealed against the denial of Modvat credit of Rs.5,19,865/- for the period November, December 1996, and the imposition of an equal amount of penalty. The appellant claimed the credit based on the raw materials used during a trial run of the plant held from October to December 1996. The dispute arose when the department objected to the credit availed, seeking recovery under Rule 57-I of the Central Excise Rules, 1944, and Section 11A(1) of the Central Excise Act. The Commissioner confirmed the demand of duty and imposed a penalty under Section 11AC, citing that the credit was taken on inputs consumed before the commencement of actual production and before obtaining Central Excise registration.

2. The appellant argued that they had obtained Central Excise registration on 11-10-1996, referring to a registration certificate. The department contested, stating the registration was granted to a different company. The appellant provided a judgment indicating the amalgamation of the erstwhile company with the appellant-company. The Tribunal acknowledged the registration date of the appellant-company and noted that the show-cause notice did not propose denying Modvat credit based on the registration date, which was incorrectly considered during adjudication.

3. Regarding the merits of the case, the appellant contended that raw materials used in the trial run of the plant qualified as 'inputs' under Rule 57A of the Central Excise Rules, 1944, and were used in the manufacture of the final product. The appellant cited precedents to support their argument, emphasizing that raw materials used in trial production were eligible for credit. The Tribunal considered these arguments and observed that raw materials used in the trial production of the final product are deemed inputs for Modvat/Cenvat credit purposes.

4. The Tribunal noted that the credit was taken during January to March 1997, when the appellant commenced commercial production. The raw materials were received and consumed before January 1997 during the trial run of the plant, making them eligible for credit as inputs. Citing settled law, the Tribunal set aside the impugned order, allowing the appeal and ruling in favor of the appellant.