1993 (5) TMI 80 - AT - Central Excise

Summary

Issues:
Appeal against order in Appeal No. KVV-54/91-BRD regarding Modvat credit under Rule 57G and Rule 57H.

Analysis:
The case involves a dispute regarding the availment of Modvat credit under Rule 57G and Rule 57H by a manufacturer of paper mill machinery. The appellants received inputs under the Modvat scheme and exemption under Notification 175/86. They faced a challenge when their clearances exceeded the exemption limit, and their final products attracted duty. The Department objected to the credit taken before filing the Modvat declaration, citing Rule 57G, which prohibits credit before filing and obtaining acknowledgment. The Assistant Collector confirmed the demand for reversing Modvat credit and imposed a penalty, which was set aside on appeal but demand was upheld.

The main argument put forth by the appellants was that even if credit is not allowable under Rule 57G, they are entitled to credit under Rule 57H. They contended that their request for credit under Rule 57H, made after a show cause notice, should have been considered for regularizing the credit. The Department's stance was that credit taken during the exemption period cannot be allowed under Rule 57H, as it was before the final products became dutiable.

After considering the arguments, the Tribunal found that the input covered by Gate Pass No. 6 dated 23-8-1989 had been utilized and was not physically available when the request for credit under Rule 57H was made. However, the input from Gate Pass No. 9 dated 20-10-1989 was available in stock, as evidenced by RG 23A Part I. The Tribunal interpreted Rule 57H, which allows credit for inputs received before obtaining acknowledgment of the declaration if they are in stock. It was concluded that credit for the input from Gate Pass No. 9 dated 20-10-1989 should have been allowed under Rule 57H, as it was in stock and would be used in dutiable final products.

Therefore, the Tribunal held that the lower authorities erred in denying credit for the input from Gate Pass No. 9 dated 20-10-1989, as it was legally permissible under Rule 57H. The demand for Modvat credit was restricted only to the duty credit on the input from Gate Pass No. 6 dated 23-8-1989, while the demand for reversal of Modvat credit for the input from Gate Pass No. 9 dated 20-10-1989 was set aside.