1993 (6) TMI 162 - AT - Central Excise

Summary

Issues:
Eligibility of the appellants for Modvat Credit on rejected goods received back by them in terms of Rule 57F(l)(ii).

Detailed Analysis:

The appellants, engaged in manufacturing Copper and Copper Alloy products, cleared goods on duty payment. Purchasers availed Modvat credit and returned defective goods, which were then remelted by the appellants for manufacturing final products. The appellants filed a declaration under Rule 57G for Modvat Credit on duty paid by customers for returned goods. Show cause notices proposed disallowance of the Modvat Credit taken by the appellants, leading to a common order-in-original by the Assistant Collector. The Assistant Collector held that rejected goods cannot be treated as inputs under Rule 57A and should have been received back under Rule 173L or 173H. The Order-in-Appeal upheld this decision, leading to the current appeal.

The Tribunal noted that the goods were received back under Rule 57F(l)(ii), remelted, and used in manufacturing final products, making the appellants eligible for Modvat Credit under Rule 57A read with Rule 57G. The Tribunal emphasized that once goods are rejected and used in manufacturing fresh final products, they cease to be final products and qualify as inputs under Rule 57A. Referring to the case law of Collector of Central Excise v. Indian Aluminium Co. Ltd., the Tribunal highlighted that goods used in the factory for manufacturing final products are eligible inputs for Modvat Credit. The Tribunal rejected the argument that Rule 173L or 173H procedures should have been followed, as those rules are not applicable when goods are subjected to a manufacturing process, unlike in this case. The Tribunal concluded that the appellants' procedure for claiming Modvat Credit was lawful and did not result in any revenue loss.

In light of the above analysis, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellants, if any.