1994 (9) TMI 203 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 6(b)(ii) regarding inclusion of duty paid on inputs under Modvat scheme in the cost of manufacture for assessing duty liability.

Analysis:
The appellant sought a stay on the requirement to deposit a significant sum towards duty pending the appeal hearing. The crux of the matter revolved around whether the duty paid on inputs under the Modvat scheme should be considered in calculating the cost of manufacture under Rule 6(b)(ii). The appellant argued that the Modvat scheme aims to benefit consumers, and the cost of production should not include the duty credit on inputs. They referenced guidelines from the Institute of Chartered Accountants of India and departmental pamphlets supporting their stance. Previous tribunal decisions were also cited to bolster their argument, emphasizing the reduction in the cost of the final product due to the credit availed under the Modvat scheme.

The respondent, however, contended that the amount paid for inputs must be included in the assessable value as per Rule 6(b)(ii) and Section 4 of the Central Excises and Salt Act. They relied on a Supreme Court decision to support their position and argued that the Modvat credit should only be utilized for duty on final products, not for calculating the cost of manufacture.

Upon review, the tribunal observed that the proceedings were initiated under Rule 6 of the Valuation Rules, distinct from Section 4 of the Act. The tribunal noted that guidelines from the Central Board of Excise and Customs and the Institute of Chartered Accountants indicated that Modvat duty credit need not be part of the assessable value. Considering the reduction in the cost of production due to the credit and the scheme's objective to benefit consumers, the tribunal found merit in the appellant's argument. Consequently, the tribunal directed the appellant to provide a personal bond equivalent to the duty amount for a stay and waiver of duty recovery.

Given the substantial duty amount at stake and its ongoing impact on the appellants' compliance, the tribunal recommended expedited processing by a Special Bench to address the matter promptly.