1991 (3) TMI 289 - AT - Central Excise

Summary

Issues:
- Appeal against the order of the Collector (Appeals) rejecting the appellants' appeal regarding Modvat credit on components cleared outside the factory and returned.
- Interpretation of rules 57A, 173H, and 173L in the context of Modvat credit eligibility for goods cleared outside and brought back.

Analysis:
1. The appeal was filed against the order of the Collector (Appeals) rejecting the appellants' claim for Modvat credit on components cleared outside the factory and returned. The appellants, manufacturers of Dump loaders, also produced components like air motors, wheel rim assembly, and pistons, which were cleared as such outside the factory but returned due to labor trouble. The Modvat credit of duty was denied on the grounds that these goods were cleared outside and not eligible for Modvat credit under rules 51A, 173H, and 173L. The appellants argued that under Rule 57A, goods manufactured and used within the factory are eligible for Modvat credit, and they had filed a declaration under Rule 57G to utilize the returned components as inputs. The contention was that the ownership of the goods still rested with them as the consignee had not taken delivery, making them eligible for Modvat credit.

2. The Ld. SDR contended that goods cleared outside the factory and returned could only be brought back under rules 57A, 173H, or 173L. He argued that the components, cleared as final products outside and returned, should be considered under Rule 173L or 173H, where goods brought back could be used even for the manufacturer's own use without further processing. However, after considering both arguments, the judge found that the components and final products were covered by the Modvat scheme, and duty had been paid on the components. The judge emphasized that the mere fact that the goods had been cleared outside and returned did not disqualify them from being notified goods eligible for Modvat credit. The judge also noted that under Rule 57A and Rule 173H, goods lying within the factory and brought back could be utilized by the manufacturer for their own use.

3. In conclusion, the judge ruled in favor of the appellants, allowing the appeal and granting them the Modvat credit on the returned components. The judge found no justification in upholding the authorities' contention that the goods cleared outside and returned were ineligible for Modvat credit. The decision was based on the understanding that the components and final products fell under the Modvat scheme, and the ownership of the goods still resided with the manufacturer due to the consignee's refusal to take delivery. The judge provided consequential relief by extending the Modvat credit to the appellants in accordance with the law.