1993 (3) TMI 223 - AT - Central Excise

Summary

Issues:
1. Whether the inputs used in the manufacture of insulated electric wires and cables qualify for modvat credit.
2. Whether the rubber compound, which is a component of insulated wires and cables, is an independent product or an intermediate product.
3. Whether there was suppression or mis-declaration in the modvat declaration leading to the reversal of modvat credit and imposition of penalty.

Detailed Analysis:
1. The appellants, engaged in manufacturing insulated electric wires and cables, claimed modvat credit for inputs like rubber chemicals, synthetic rubber, and other chemicals. A show cause notice alleged that these inputs were used in manufacturing a distinct product, rubber compound, exempted from duty. The Collector ordered reversal of modvat credit and imposed a penalty based on this allegation. The appellants contended that the disputed inputs were indeed used in manufacturing insulated wires and cables, forming an integral part of the final product. The Tribunal found no mis-declaration in the modvat declaration as the inputs were legitimately used in the manufacturing process. The argument of suppression due to the absence of a classification list for rubber compound was dismissed since the compound was inherently part of the insulated wires and cables, and its captive consumption did not warrant duty evasion.

2. The Tribunal further analyzed whether the rubber compound should be considered an independent product or an intermediate product. It was established that rubber chemicals and synthetic rubber, components of the compound providing insulation to the wires and cables, were physically present in the final product. Despite the compound being manufactured separately, it was deemed an intermediate product crucial to the manufacturing process. Therefore, the benefit of Rule 57D, allowing credit for duty paid on components used in intermediate products, was deemed applicable. The Tribunal concluded that the rubber compound was an intermediate product, justifying the availment of modvat credit for duty payment on insulated wires and cables.

3. Ultimately, the Tribunal set aside the Collector's order, ruling in favor of the appellants. The decision was based on the findings that the inputs were legitimately used in manufacturing the final product, the rubber compound was an intermediate product, and there was no intention to evade duty. The appeal was allowed on both procedural and substantive grounds, emphasizing the legitimate utilization of modvat credit for duty payment on the insulated wires and cables.