1993 (2) TMI 180 - AT - Central Excise

Summary

Issues Involved:

1. Appropriateness of Modvat credit utilization.
2. Requirement of product-wise maintenance of accounts under Modvat rules.
3. Applicability of legal provisions and case laws to the facts of the case.
4. Interpretation of Rule 57F(3) and Rule 57G under the Modvat scheme.
5. Argument regarding Modvat scheme as a non-subsidy mechanism.

Issue-wise Detailed Analysis:

1. Appropriateness of Modvat Credit Utilization:

The primary issue revolves around whether the respondents appropriately utilized the Modvat credit for the duty paid on copper wire rods. The Department argued that the credit taken at the rate of Rs. 6,200/- P.M.T. was higher than the duty payable on the final product, copper strips, which was Rs. 4,500/- P.M.T. This resulted in an excess credit of Rs. 1,700/- P.M.T. being used against other products, which the Department contended was not permissible. The Collector (Appeals) allowed the respondents' appeal, stating that there was no requirement for strict product-wise correlation between the raw material and the finished product under the Modvat rules.

2. Requirement of Product-wise Maintenance of Accounts Under Modvat Rules:

The Department's stance was that product-wise maintenance of accounts was necessary to prevent the excess credit from being used for other products. The respondents countered that Chapterwise maintenance of RG 23A Part II was not mandated by the rules, and the Ministry's letters also did not impose such requirements. The Tribunal noted that there was no explicit requirement under the rules for one-to-one correlation or product-wise accountal, especially when all final products were dutiable.

3. Applicability of Legal Provisions and Case Laws to the Facts of the Case:

Both parties cited various case laws and legal provisions to support their arguments. The Department relied on the Tribunal's decision in East India Pharmaceutical and a Trade Notice by the Bombay Collectorate. The respondents referred to decisions of the South Regional Bench and the Delhi High Court, arguing that the credit could be utilized for any final product for which the input was intended. The Tribunal found that the issues in the cited cases were different from the present case, as those involved exempted final products, whereas in this case, all final products were dutiable.

4. Interpretation of Rule 57F(3) and Rule 57G Under the Modvat Scheme:

The Tribunal analyzed Rule 57F(3) and Rule 57G, emphasizing that the rules allowed the credit of duty paid on inputs to be utilized towards the payment of duty on any final product covered by the declaration filed under Rule 57G. The Tribunal noted that the respondents had complied with the requirement of declaring the common input and the final products. It was concluded that there was no requirement under Rule 57F(3) or Rule 57G(3) for quantum-wise accountal of inputs for each final product.

5. Argument Regarding Modvat Scheme as a Non-subsidy Mechanism:

The Department argued that the Modvat scheme was not intended to subsidize the payment of duty on final products but to mitigate the burden of input taxation. The Tribunal agreed in principle but highlighted that Rule 57A provided for the Central Government to restrict the credit of specified duty if necessary. Since no such restriction was cited in this case, there was no legal basis to limit the credit utilization as argued by the Department.

Conclusion:

The Tribunal rejected the appeal from the Revenue, affirming the Collector (Appeals)'s order. It concluded that the respondents had appropriately utilized the Modvat credit as per the rules, and there was no requirement for product-wise maintenance of accounts or restriction of credit utilization in the absence of specific government orders or notifications.