1991 (3) TMI 271 - AT - Central Excise

Summary

Issues:
- Denial of MODVAT credit on duty paid components cleared outside the factory and returned.
- Interpretation of rules governing MODVAT credit eligibility for goods cleared outside and brought back.

Analysis:
The appeal was filed against the Collector (Appeals) order rejecting MODVAT credit on components cleared outside and returned due to labor trouble. The appellants manufactured dump loaders and related components, which were sometimes cleared as such outside the factory. The denial of MODVAT credit amounting to Rs. 9791.40 was based on the argument that goods cleared outside and returned do not qualify as "inputs" under Rule 57A. The appellants argued that goods used within the factory are eligible for MODVAT credit as per Rule 57A and exemption notifications for captively consumed goods. They declared the components as inputs for loaders and filed a declaration under Rule 57G before utilizing them. The contention was that MODVAT credit should be available to them.

The respondent, on the other hand, argued that goods cleared outside and returned should be governed by Rule 51A, 173H, or 173L. They contended that since the components were cleared as final products outside and returned, the proper course is Rule 173L or 173H, which allows for utilization without further processing. However, after considering both arguments, the judge found that both the components and final products were covered by the MODVAT scheme, and duty had been paid on the components. The fact that the components were returned did not disqualify them from being eligible for MODVAT credit. The judge noted that Rule 57A covers inputs used within the factory and Rule 173H allows for the utilization of goods brought back for their own use. Therefore, the judge concluded that there was no justification for upholding the authorities' contention and allowed the appeal, granting consequential relief in the form of extending MODVAT credit to the appellants.