1994 (5) TMI 108 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 57H regarding Modvat Credit eligibility for input content in finished goods.
- Deletion of sub-clause (ii) of sub-rule (1) of Rule 57H and its impact on Modvat Scheme.
- Dispute over transitional benefit under Rule 57H for inputs used in final products cleared after a specific date.

Analysis:
1. The Collector of Central Excise appealed against the Order-in-Appeal allowing Modvat Credit to a company for input content in finished goods in stock when opting for Modvat Scheme. The Assistant Collector had granted a restricted credit amount, which was increased by the Collector (Appeals). The Departmental Representative argued that post-deletion of sub-clause (ii) of Rule 57H, the benefit was not available for inputs used in final products after a certain date.

2. The Respondent's Consultant contended that the benefit under Rule 57H was still applicable to inputs used in final products cleared post-1-3-1987, even after the deletion of sub-clause (ii). Referring to judicial precedents emphasizing interpreting statutes to promote their purpose, he argued against restricting the Modvat Scheme's scope. He highlighted subsequent amendments to Rule 57H as supporting their interpretation.

3. The Member analyzed Rule 57H, noting the deletion of sub-clause (ii) and its impact on transitional credit eligibility. While the Department argued for a strict interpretation, the Member emphasized that post-deletion, only inputs in stock at the declaration time were eligible for credit, not those already used in final products. The Member rejected the argument that the subsequent reinsertion of sub-clause (ii) had retrospective effect, as it aimed to cover new items post-25-7-1991.

4. Consequently, the Department's Appeal was allowed, setting aside the Order-in-Appeal and restoring the Assistant Collector's decision. The judgment clarified that transitional credit under Rule 57H applied only to inputs in stock at the declaration time, not those already incorporated into final products. The Member's interpretation aligned with the plain reading of the provision, rejecting attempts to supply omitted provisions for interpretation and emphasizing the limited scope of Modvat eligibility for specific input conditions.