1989 (6) TMI 226 - AT - Central Excise

Issues Involved:
1. Applicability of Rule 57D of the Central Excise Rules.
2. Misstatement regarding the generation of polypacks.
3. Application of Rule 57J and Notification No. 351/86.
4. Treatment of polypacks as intermediate products.
5. Denial of natural justice.
6. Prejudgment by the Assistant Collector.
7. Discriminatory treatment compared to other assessees.

Detailed Analysis:

1. Applicability of Rule 57D of the Central Excise Rules:
The appeal argues that Rule 57D is not applicable in their case. The Assistant Collector had admitted that the polypacks are intermediate goods but rejected the Modvat Credit facility on the grounds that the said intermediate products were exempt from duty under Notification No. 132/86 dated 1-3-1986. The Tribunal found that Rule 57D applies only to intermediate goods and that the polypacks, being produced by job workers and not within the factory of the appellant, do not satisfy the condition of the proviso to Rule 57D(2).

2. Misstatement Regarding the Generation of Polypacks:
The appellant contended that the order wrongly mentions that they had urged that polypacks were generated in the process of making the final product. The Tribunal did not specifically address this issue but focused on the applicability of relevant rules and notifications.

3. Application of Rule 57J and Notification No. 351/86:
The appellant argued that Rule 57J and Notification No. 351/86 unequivocally allow the enjoyment of the credit as prayed for. The Tribunal, however, agreed with the Collector (Appeals) that the polypacks cannot be considered as intermediate products in the course of manufacture of synthetic detergents, which are the final products of the appellants. Therefore, the benefits claimed by the appellants in terms of Rule 57J and Notification 351/86 were not applicable.

4. Treatment of Polypacks as Intermediate Products:
The Assistant Collector held that polypacks are intermediate products but disallowed credit on the grounds that they are exempt from duty. The Tribunal found that the polypacks are not intermediate products in the manufacture of detergent powder, as the detergent powder already comes into existence before the bags are put to use for its packing. Therefore, the polypacks do not acquire the status of intermediate products.

5. Denial of Natural Justice:
The appellant argued that the Collector (Appeals) failed to traverse all the grounds urged in the appeal petition, leading to a denial of natural justice. The Tribunal did not find merit in this argument and focused on the substantive issues regarding the applicability of the rules and notifications.

6. Prejudgment by the Assistant Collector:
The appellant argued that the Assistant Collector had already made up his mind to deny the credit as the notice issued to them was a show cause notice and adjudication order rolled into one. The Tribunal examined the show cause notice and found that it did not indicate that the Assistant Collector had prejudged the issue. The notice was found to be tentative and within the requirements and limits of a show cause notice.

7. Discriminatory Treatment Compared to Other Assessees:
The appellant contended that other assessees of the Collectorate were enjoying Modvat Credit facilities on granules sent outside for conversion by job workers. The Tribunal acknowledged this contention and noted that there should be uniformity of treatment for situations and products placed in similar circumstances. The authorities were advised to look into the matter and rectify the position if necessary.

Conclusion:
The appeal was rejected. The Tribunal upheld the decision of the Collector (Appeals) that the polypacks are not intermediate products in the manufacture of the final product of the appellants. The Tribunal also noted the issue of discriminatory treatment and advised the authorities to ensure uniformity of treatment in similar circumstances.

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