1993 (11) TMI 128 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57F(l)(ii) regarding the treatment of Regulators supplied along with Fans for duty payment.
2. Consideration of Modvat Credit eligibility for items supplied along with final products.
3. Financial hardship plea for grant of stay.

Analysis:
1. The case involved a dispute regarding the demand of duty raised against the appellants concerning Modvat Credit taken for Regulators supplied along with Fans. The Department sought to recover duty on the Regulators equal to the credit taken by the appellants, claiming that the Regulators were cleared as such and not used in the manufacture of Fans, under Rule 57F(l)(ii). The appellants argued that a previous Government of India Order treated fan-regulators as part of Fans, contending that the supply of fan-regulators with Fans should be considered as used in the manufacture of Fans, not as a separate supply of Regulators.

2. The appellants also raised the issue of conflicting decisions on Modvat Credit eligibility for items supplied along with final products, citing cases where different Tribunals had differing views on whether certain items should be considered inputs in relation to the manufacture of final products. The appellants argued that if Regulators supplied with Fans were considered inputs in relation to the Fans' manufacture, they should be eligible for Modvat Credit, challenging the Department's assertion that the Regulators were cleared as such.

3. Additionally, the appellants pleaded extreme financial hardship, stating that their factory was run by a Workers Union and had suffered significant losses. They requested a grant of stay in light of their financial difficulties. The Departmental Representative opposed the appellants' arguments, supporting the impugned order and asserting that Rule 57F(l)(ii) applied to the case, deeming the Regulators as cleared items separate from the Fans.

4. The Tribunal considered the arguments presented, noting the conflicting decisions on the treatment of items supplied along with final products. Referring to various Tribunal decisions, the Tribunal found that Regulators supplied with Fans could be considered inputs in relation to the Fans' manufacture, potentially making them eligible for Modvat Credit. As a result, the Tribunal granted a stay in favor of the appellants and referred the case to a larger Bench for further consideration due to conflicting views on the matter.

5. The Tribunal highlighted the need to determine the appropriate duty rate for the Regulators on clearance, either the amount demanded by the Department or the sum paid by the appellants. Given the conflicting decisions and the significance of the issue, the Tribunal referred the question to a Special Bench for resolution, emphasizing the importance of addressing the conflicting views and ensuring a fair and consistent decision.