1993 (5) TMI 85 - AT - Central Excise

Summary

Issues:
- Whether Modvat credit on molasses can be used for the payment of duty on Vinyl Acetate Monomer (VAM) when molasses is converted into industrial alcohol?
- Whether the subsequent amendment to the proviso of Rule 57D, which requires intermediate products to be specified as inputs or final products under a notification, applies retrospectively?

Analysis:
1. The appeal was against the rejection of Modvat credit on molasses used in the production of VAM. The Department argued that industrial alcohol, an intermediate product, is not excisable under Central Excise but under State Excise, thus disallowing the Modvat credit. The appellant cited a Tribunal decision stating that the credit should not be denied when non-excisable intermediate products emerge during manufacturing. The appellant also argued that the amendment to Rule 57D, requiring specification of intermediate products under a notification, should apply prospectively.

2. The Department contended that industrial alcohol is not exempt from duty or charged at nil rates under Central Excise, making Rule 57D proviso applicable. The Department acknowledged the previous Tribunal decision but argued that the subsequent amendment clarifies that benefits are only available if intermediate products are specified under a notification. The Department claimed that the amendment was clarificatory and should apply retrospectively.

3. The Tribunal noted the previous decision by the Special Bench and upheld it, emphasizing that the amendment to Rule 57D was substantive, not clarificatory. The Tribunal found no evidence supporting the retrospective application of the amendment. The Tribunal concluded that the appellant was entitled to the Modvat credit on molasses for the production of VAM, as the industrial alcohol was not specified under the notification. The appeal was allowed, restoring the disallowed credit.