1994 (10) TMI 162 - AT - Central Excise

Summary

Issues Involved:

1. Whether the destruction of goods under Rule 49 of the Central Excise Rules, 1944, debarred the appellant from claiming benefits under Rule 57D.
2. Whether the Collector could prescribe conditions in contravention of Rule 57D.
3. Whether the goods destroyed could be treated as waste material under Rule 57D.
4. Whether the appellant was entitled to claim a refund for the Modvat credit reversed.

Detailed Analysis:

1. Destruction under Rule 49 and Claiming Benefits under Rule 57D:

The appellant argued that the destruction of goods under Rule 49, which included a condition to reverse Modvat credit, should not debar them from claiming benefits under Rule 57D. Rule 57D specifies that credit of input duty should not be denied if the inputs are contained in waste, refuse, or by-products. The Tribunal noted that the goods destroyed were damaged and sub-standard, obtained during the manufacturing process, and not as a result of manufacturing a final product. Therefore, these goods should be considered waste or scrap, and the credit of duty paid on inputs should not be denied under Rule 57D.

2. Conditions Prescribed by the Collector:

The appellant contended that the Collector's condition to reverse Modvat credit was in contravention of Rule 57D, which allows credit for inputs contained in waste. The Tribunal agreed, stating that the Collector was not competent to impose conditions that violated the provisions of Rule 57D. The Tribunal cited previous decisions, including CCE v. Mysore Polymer and Rubber Products (P) Ltd. and CCE v. Srichakra Tyres Ltd., which supported the view that defective products emerging during manufacturing should be considered waste, and credit should not be denied.

3. Treatment of Destroyed Goods as Waste:

The Tribunal analyzed whether the destroyed goods could be treated as waste under Rule 57D. It was established that defective and damaged pieces of Gypsum Board were generated during the manufacturing process. These pieces were not marketable and should be classified as waste. The Tribunal referred to the decision in CCE v. Srichakra Tyres Ltd., which held that defective products not marketable as end-products should be considered waste, and credit for inputs should be allowed.

4. Entitlement to Refund for Reversed Modvat Credit:

The appellant claimed that the reversal of Modvat credit was under protest and sought a refund. The Tribunal found that the Collector's order for destruction, conveyed by the Asstt. Collector, was administrative and not quasi-judicial. Therefore, it was not an appealable order. The Tribunal referenced decisions in Brooke Bond India Ltd. and Foam Rubber Factory v. CCE, which supported the view that communications from the Collector or Asstt. Collector were not adjudication orders and hence not subject to appeal. Consequently, the appellant was entitled to claim a refund for the reversed Modvat credit.

Conclusion:

The Tribunal allowed the appeal, setting aside the impugned order and granting consequential relief under the relevant provisions of law. The conditions imposed by the Collector were found to be in contravention of Rule 57D, and the destroyed goods were classified as waste, entitling the appellant to the Modvat credit and refund.