1990 (3) TMI 196 - AT - Central Excise

Summary

Issues:
- Appeal against the order of the Collector of Central Excise regarding MODVAT credit utilization for exempted goods.

Analysis:
1. The case involves an appeal against the Collector of Central Excise's order concerning the utilization of MODVAT credit for exempted goods. The appellants manufactured paints and Alkyd Resins, with the latter being exempt from duty payment. The issue arose when a quantity of exempted Alkyd Resins, manufactured using inputs for which MODVAT credit was claimed, were cleared from the factory without duty payment and used in the appellants' other units. The Collector held that no credit is allowed for final products exempted from duty and ordered the recovery of the utilized credit amount.

2. The appellants argued that under MODVAT rules, if an exempted intermediate product is used in the manufacture of dutiable final products, the MODVAT credit for inputs should be available. They contended that although some Alkyd Resins were cleared without duty payment, they were used in other units, fulfilling the rules' requirements. The appellants referred to Notification 201/79 and a relevant case but couldn't confirm if the situations were identical. The absence of a specific provision for credit transfer between units was highlighted.

3. The Senior D.R. emphasized that MODVAT credit is unit-specific, with no provision for inter-factory credit transfer. The Tribunal noted that the MODVAT Scheme aims to prevent duty cascading and mandates duty payment if inputs aren't used for specified final products. The rules don't allow input clearance without duty payment, even if transferred to another unit of the same manufacturer. The Tribunal rejected the appellants' claim, citing the lack of provisions for credit transfer or clearance of exempted intermediate products between units.

4. A comparison was made to a Supreme Court case involving exemption benefits for a similar scenario, but the Tribunal distinguished the MODVAT Scheme's specific provisions. The absence of rules for credit transfer or clearance of exempted intermediate products between units led the Tribunal to deny the appellants' claim for MODVAT credit on inputs used in Alkyd Resins cleared without duty payment. The appeal was ultimately rejected based on the Scheme's legislative framework and the lack of provisions for credit transfer or clearance of exempted intermediate goods between units.