1991 (2) TMI 277 - AT - Central Excise

Summary

Issues Involved:
1. Proper declaration of inputs under Rule 57G for availing MODVAT Credit.
2. Eligibility for MODVAT Credit under Rule 57C for inputs used in manufacturing intermediate products exempt from duty.
3. Applicability of Rule 57D(2) when intermediate products are partly cleared outside the factory.

Issue-wise Detailed Analysis:

1. Proper Declaration of Inputs under Rule 57G for Availing MODVAT Credit:
The Respondents had filed declarations under Rule 57G for the inputs used in the manufacture of Aluminium hydrate, calcined alumina, and aluminium. The authorities contended that the declarations were improper as they did not explicitly mention aluminium as the final product. However, the Respondents argued that their plant was integrated, with aluminium being the end-product, and intermediate products like calcined alumina and aluminium hydrate were also manufactured. The Tribunal observed that the Respondents' manufacturing activities were well known to the authorities and that the declarations filed were sufficient for availing MODVAT Credit. The Tribunal concluded that the declarations complied with Rule 57G requirements, considering the integrated nature of the manufacturing process and the detailed information provided by the Respondents.

2. Eligibility for MODVAT Credit under Rule 57C for Inputs Used in Manufacturing Intermediate Products Exempt from Duty:
The Revenue argued that MODVAT Credit could not be availed for inputs used in the manufacture of intermediate products (calcined alumina) exempt from duty, as per Rule 57C. However, the Tribunal noted that Rule 57D(2) provides an exception to Rule 57C, allowing credit for inputs used in intermediate products exempt from duty if these intermediates are used within the factory for manufacturing the final product. The Tribunal held that the Revenue's interpretation would render Rule 57D(2) redundant. Therefore, the Respondents were entitled to MODVAT Credit for inputs used in manufacturing intermediate products, as these intermediates were used in producing the final product (aluminium).

3. Applicability of Rule 57D(2) When Intermediate Products are Partly Cleared Outside the Factory:
The Revenue contended that the Respondents should be disqualified from MODVAT Credit benefits under Rule 57D(2) because part of the intermediate products (calcined alumina) was cleared outside the factory. The Tribunal rejected this argument, stating that Rule 57D(2) does not support such an interpretation. The Respondents had reversed the MODVAT Credit for the portion of goods cleared outside the factory, as instructed by the Departmental authorities. The Tribunal emphasized that the difficulty in apportioning the credit between goods cleared outside and those used as intermediate products should not be a reason to deny the substantive concession of MODVAT Credit. The Tribunal upheld the findings of the lower appellate authority, affirming that the Respondents were entitled to MODVAT Credit even if part of the intermediate products was cleared outside the factory.

Conclusion:
The Tribunal dismissed the Revenue's appeal, holding that the Respondents had made proper declarations under Rule 57G, were entitled to MODVAT Credit under Rule 57C and Rule 57D(2), and that the partial clearance of intermediate products outside the factory did not disqualify them from availing MODVAT Credit. The Tribunal found no infirmity in the lower appellate authority's decision and ruled in favor of the Respondents.