1994 (11) TMI 204 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on fuel tanks and struts used in the manufacture of motor vehicles.
2. Non-declaration of fuel tanks and struts as intermediate products.
3. Permission under Rule 57F(2) for removal of inputs to job workers.
4. Barred show cause notices beyond the limitation period.

Analysis:

1. The appeal concerns the denial of Modvat credit on fuel tanks and struts used in manufacturing motor vehicles. The appellant, a motor vehicle manufacturer, purchased inputs for these items and sent them to job workers for manufacturing. The appellant argued that the removal of inputs was in accordance with the permission granted by the Assistant Collector under Rule 57F(2). The Counsel cited a Tribunal decision to support the claim that non-obtaining of permission under Rule 57F(2) does not affect Modvat credit eligibility if otherwise eligible. The Tribunal found merit in the appellant's argument and dispensed with the pre-deposit requirement, allowing a stay on recovery pending appeal.

2. The issue of non-declaration of fuel tanks and struts as intermediate products was raised. The opposing party contended that these items are final products, not intermediate products. However, the Tribunal found force in the appellant's argument that fuel tanks and struts are indeed intermediate parts for manufacturing motor vehicles. Citing a previous Tribunal decision, the Tribunal held that any distinct excisable item coming into existence during the manufacturing process is an intermediate product. The Tribunal noted that the items were returned for further use in manufacturing motor vehicles, which were cleared after payment of duty, supporting the appellant's claim.

3. Regarding the permission under Rule 57F(2) for removal of inputs to job workers, the opposing party argued that the permission granted was not for bringing into existence new end-products but for other operations necessary for manufacturing goods. However, the Tribunal observed that the permission granted in July 1987 for removal of inputs was in compliance with the procedure under Rule 57F(2). The Tribunal noted that the applicants were exempted from certain requirements, indicating prima facie compliance with the procedure. Consequently, the Tribunal found that the appellant had made a strong prima facie case for waiver of pre-deposit of duty.

4. Lastly, the appellant argued that the show cause notices were time-barred beyond the six-month limitation period. While this issue was not extensively discussed in the judgment, it was noted that the Tribunal dispensed with the pre-deposit requirement and allowed a stay on recovery pending the appeal, indicating a favorable stance towards the appellant's arguments. The appeal was fixed for hearing on 1st March 1995, considering the significance of the matter at hand.