1992 (3) TMI 231 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57F(1)(ii) of the Central Excise Rules regarding the assessment of duty on inputs received under the modvat scheme.
2. Determination of assessable value and rate of duty for inputs cleared without undergoing any process for emergency supplies.
3. Application of the deeming concept under the modvat scheme for inputs cleared without processing.
4. Compliance with the provisions of the Central Excise Act and Rules in relation to the duty payable on inputs cleared as such.

Analysis:

The appeal before the Appellate Tribunal CEGAT, Bombay pertained to the rejection of an appeal by the appellants who received duty paid components as inputs under the modvat scheme for manufacturing tractors. The issue revolved around the reversal of modvat credit on certain components cleared without processing for emergency supplies. The Department contended that the inputs should suffer duty as per the rate and value on the date of clearance, treating the appellants as manufacturers. The Collector (Appeals) upheld the demand for the differential duty, leading to the current appeal.

The consultant for the appellants argued that duty under the Central Excise Act is payable by the manufacturer for goods produced, emphasizing that the inputs were not manufactured by the appellants. Citing legal precedents, it was asserted that duty cannot be charged twice on the same goods, and the provisions of Rule 57F(1)(ii) should not allow demanding duty exceeding the credit taken on inputs. The consultant highlighted the Act's primacy over Rules and the retention of duty paid character by inputs.

On the other hand, the Department's representative contended that the modvat scheme aims to benefit manufacturing activities, requiring inputs to be used in the final product's manufacture. The deeming fiction under the Rule necessitates duty payment on inputs' assessable value at clearance. Referring to a decision by the South Regional Bench, it was argued that the duty credit must be reversed at the time of removal, irrespective of subsequent exemptions or rate changes.

The Tribunal analyzed Rule 57F(1)(ii) and emphasized that inputs cleared for home consumption are subject to duty as if manufactured in the factory, aligning the receiver with a manufacturer. The deeming concept treats such clearances akin to manufacturing activities, necessitating compliance with valuation and duty rate requirements. The proviso safeguards revenue interests in cases of exemptions or rate reductions post-credit. The Tribunal upheld the deeming concept's consistency with the modvat scheme, dismissing the appeal based on the scheme's objective of preventing input tax cascading and emphasizing that it is not intended for stock and sale purposes.