1990 (5) TMI 139 - AT - Central Excise

Summary

Issues:
Whether MODVAT credit of duty taken on inputs used in the manufacture of cut tyres and tubes is permissible and whether credit attributable to the inputs in the waste is recoverable.

Analysis:
The appeal was filed by the Collector of Central Excise, Madurai against the order of the Collector of Central Excise (Appeals), Madras dated 24-2-1989. The main issue was whether MODVAT credit of duty taken on inputs used in the manufacture of cut tyres and tubes is permissible and whether credit attributable to the inputs in the waste is recoverable. The Counsel for the Respondent argued that the issue is covered by a previous ruling of the Tribunal and a judgment of the Delhi High Court in a similar case. The Department did not dispute this fact.

The Division Bench of the Delhi High Court in a previous case observed that waste/scrap generated during the manufacturing process of tyres, tubes, and other rubber products is not a result of any new article emerging but is obtained in the course of manufacturing the end product. The waste/scrap is considered as a byproduct of the manufacturing process and not a separate manufactured item. The Tribunal also held that defective products emerging during the manufacturing process should be considered as waste or byproduct, and the credit for inputs contained in them should be available to the appellants.

Additionally, a Trade Notice issued by the Collector of Central Excise, Madurai clarified that cut tyres and tubes are classified as waste and scrap under the Central Excise Tariff. It was further clarified that the credit of duty paid on inputs used in the manufacture of cut tyres and tubes should not be denied on the grounds that they are waste or scrap. Based on these materials and clarifications, the Tribunal held that the impugned order was sustainable in law, and the appeal filed by the Department was dismissed. The Cross objection filed was dismissed as misconceived in law.