1994 (2) TMI 183 - AT - Central Excise

Summary

Issues involved: Interpretation of Rule 57D(1) of the Central Excise Rules regarding disallowance of Modvat Credit for inputs used in the manufacture of Dry Cells that are later destroyed as defective.

Summary:

1. The appeal was filed by M/s. Union Carbide India Limited against the Collector's order disallowing Modvat Credit for inputs used in the manufacture of Dry Cells that were destroyed as defective. The Collector held that the Waste and Scrap did not arise during the manufacturing process but after the final products were made. The appellant argued that the Waste arose during testing, before the completion of manufacture, citing departmental instructions and previous tribunal decisions supporting their case.

2. The Senior Departmental Representative opposed the appeal, referring to previous tribunal decisions where Waste arising after the manufacture of final products was deemed ineligible for Modvat benefit. He argued that testing was not considered a stage of manufacture and cited cases to support his position.

3. The Tribunal considered the definition of manufacture in the Central Excises and Salt Act, departmental instructions, and previous decisions. They concluded that the Waste arising during testing before final approval constituted Waste during manufacture, making the appellant eligible for Modvat Credit. The Collector's direction was set aside, and the appeal was allowed, granting the appellants consequential benefits.