1994 (4) TMI 172 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57D of the Central Excise Rules, 1944 regarding MODVAT credit on broken glass bottles.
2. Applicability of Rule 57F(4) in the context of waste arising during the manufacturing process.
3. Determination of limitation period for seeking duty recovery on scrap of glass bottles.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Madras involved a dispute between the Revenue and the respondents regarding the reversal of MODVAT credit on glass bottles broken during the packing process. The Collector of Central Excise (Appeals), Bangalore had allowed the respondents' plea, citing Rule 57D of the Central Excise Rules, 1944, and also ruled in favor of the respondents on the issue of limitation.

The appellant-Collector contended that the credit availed on glass bottles as inputs contravened Rule 57C and argued that waste and scrap of glass bottles did not qualify as a by-product under Rule 57A. Reference was made to a previous judgment by CEGAT to support the argument that damaged glass bottles during packing cannot be considered waste under Rule 57D.

The original authority demanded recovery of MODVAT credit on glass bottles, stating that they were not inputs and hence the waste could not be treated as per Rule 57F(4)(a). However, the lower appellate authority set aside this order, emphasizing that the waste arising during the manufacturing process need not result in denial or variation of credit, as per Rule 57D, especially if the waste is removed from the factory.

During the proceedings, the Department reiterated its grounds of appeal and questioned the disallowance of MODVAT credit on broken glass bottles. The Tribunal observed that the broken bottles occurred after the credit was taken and were part of the manufacturing process. It was established that the glass bottles were used for the finished product, and any waste arising from their use was covered under Rule 57F(4).

The Tribunal further analyzed Rule 57D, which prohibits the denial or variation of specified duty credit on inputs contained in waste or by-products arising during the manufacture of the final product. The respondents' case fell within the scope of this rule, as determined by the lower appellate authority. Consequently, the Tribunal upheld the lower authority's decision, dismissing the Revenue's appeal.

In conclusion, the judgment clarified the application of Rule 57D and Rule 57F(4) in the context of MODVAT credit on broken glass bottles, emphasizing that the waste generated during the manufacturing process does not necessarily lead to the reversal of credit, as long as it aligns with the provisions of the Central Excise Rules.