1994 (1) TMI 164 - AT - Central Excise

Modvat credit - Adjustment in Modvat credit due to subsequent variation in duty payment on inputs

Summary

Issues:
1. Appeal against order of Collector of Customs and Central Excise regarding Modvat credit for metal containers.
2. Barred by limitation due to failure to appeal against initial decision.
3. Eligibility for Modvat credit in terms of Rule 57A.
4. Requirement of permission to avail Modvat credit.
5. Competency of Superintendent to refuse permission for Modvat credit.
6. Interpretation of Modvat Rules regarding inclusion of container value in assessable value.

Analysis:
1. The appeal was filed against the order of the Collector of Customs and Central Excise regarding Modvat credit for metal containers used in the manufacturing process. The initial decision by the Superintendent, communicated in a letter dated 12-7-1988, stated that the appellants could not avail of the Modvat credit for duty paid on the containers. The Collector (Appeals) held that since no appeal was filed against this order, the present appeal was barred by limitation.

2. The learned Advocate for the appellants argued that they became eligible for Modvat credit as they included the cost of containers in the assessable value of the finished product and paid the differential duty. He contended that the mere fact of delayed payment should not disentitle the appellants from claiming Modvat credit. The inclusion of container cost in the assessable value from 1986 onwards made them eligible for Modvat credit under Rule 57A.

3. The Tribunal considered the Modvat Rules and clarified that once the authorities decided that the container cost should be included in the assessable value and the appellants paid the required duty, they became eligible for Modvat credit from the time the duty was charged on the container value. The Tribunal emphasized that the appellants were not required to seek permission to avail Modvat credit, as the Superintendent was not designated as the proper officer for this purpose.

4. The Tribunal highlighted that the Modvat Rules required a declaration under Rule 57G for availing Modvat credit, and there was no provision mandating permission to claim credit once duty was paid on the declared inputs. The Superintendent did not have the authority to refuse permission for Modvat credit, as the proper officer designated under Rule 57G was the Assistant Collector of Central Excise.

5. In conclusion, the Tribunal found that the orders of the Superintendent dated 12-7-1988 and 6-11-1989 were not appealable orders. The appellants were directed to work out their remedy in accordance with the Modvat Rules and could claim Modvat credit, subject to limitation. The Tribunal held that the Collector (Appeals) order was misconceived in law and disposed of the appeal accordingly.