1994 (12) TMI 198 - AT - Central Excise

Summary

Issues:
- Modvat credit eligibility on copper bars and rods used in manufacturing copper winding wires.
- Compliance with Rule 57F(2) and Notification No. 214/86.
- Admissibility of modvat credit on additional customs duty.
- Interpretation of Notification No. 149/86-C.E.
- Application of Rule 57A and Rule 57F(2) in the case.

Modvat Credit Eligibility:
The appellants claimed modvat credit @ Rs. 6200/- PMT on copper bars and rods used in manufacturing copper winding wires. The Collector of Central Excise (Appeals) set aside the adjudication orders of the Assistant Collector, limiting the credit to Rs. 2900/- PMT excise duty on copper rods. The appellants purchased copper bars, sent them for conversion into rods, and availed modvat credit. The Tribunal held that the appellants were entitled to the benefit of credit of additional customs duty paid by them @ Rs. 3300/- PMT, in addition to the credit @ Rs. 2900/- on copper rods. The appellants complied with the modvat scheme and maintained statutory records.

Compliance with Rule 57F(2) and Notification No. 214/86:
The show cause notices alleged that the appellants did not obtain permission under Rule 57F(2) and failed to follow Notification No. 214/86 when sending copper bars for conversion into rods. The appellants contended that these provisions were not applicable. The Assistant Collector accepted their contentions, vacating the demand notices. The Tribunal observed that the appellants were eligible for modvat credit despite non-compliance with Rule 57F(2) procedural requirements.

Admissibility of Modvat Credit on Additional Customs Duty:
The dispute centered on the admissibility of modvat credit on additional customs duty paid on copper bars. The Collector (Appeals) limited the credit to excise duty on copper rods. However, the Tribunal held that the appellants were entitled to the credit of additional customs duty paid, as per Rule 57A, despite the job worker opting to pay duty on the rods without availing modvat credit.

Interpretation of Notification No. 149/86-C.E.:
The Tribunal interpreted Notification No. 149/86-C.E., which prescribed the rate of duty on wrought rods. The notification allowed a concessional rate of duty if modvat credit was not availed on additional duty of customs. The appellants received the rods after payment of duty by the job worker, enabling them to claim modvat credit.

Application of Rule 57A and Rule 57F(2):
The Tribunal emphasized that the appellants were eligible for modvat credit on additional customs duty paid, as per Rule 57A. Despite non-compliance with Rule 57F(2) procedural requirements, the appellants were entitled to the substantive benefit of credit. The transaction between the job worker and the appellants was revenue neutral, as the inputs were used in the manufacture of final products under the modvat scheme. The appeals were allowed with consequential relief granted to the appellants.