1994 (12) TMI 216 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Modvat credit for inputs used in the manufacture of final products cleared under bond for export.
2. Applicability of Rule 57C and Rule 57F(3) of the Central Excise Rules.
3. Interpretation of "final products cleared for export under bond."
4. Legal validity of Trade Notice No. 46/Bombay III/General (24)/94.

Summary:

1. Eligibility of Modvat Credit:
The main issue is whether Modvat credit of duty paid on inputs used in the manufacture of final products, part of which was cleared under bond for export in terms of Rules 191B/191BB, can be utilized for clearance of the final product for home consumption. The Department's objection is based on the premise that such clearances are at Nil rate of duty, attracting Rule 57C. The appellants argue that this issue is covered by previous decisions, which allowed such credit.

2. Applicability of Rule 57C and Rule 57F(3):
The Department contends that Modvat credit should not be allowed if the final product is cleared without payment of duty, as per Rule 57C. They argue that POY/PSF cleared under bond for export should be treated as exempted goods. The appellants counter that the proviso to Rule 57F(3) allows credit for inputs used in final products cleared for export under bond, and this should apply to their case.

3. Interpretation of "Final Products Cleared for Export Under Bond":
The Tribunal examined whether POY/PSF, as final products cleared under bond, fall within the scope of the proviso to Rule 57F(3). The Tribunal concluded that the term "final products cleared for export under bond" includes goods cleared under Rules 191B/191BB. Therefore, the credit earned from inputs used in such export products can be utilized for similar goods cleared for home consumption.

4. Legal Validity of Trade Notice No. 46/Bombay III/General (24)/94:
The Tribunal noted that the Trade Notice, which denies Modvat credit for indigenous raw materials used in final products cleared under Rule 191BB, lacks legal backing. The Tribunal emphasized that any denial of Modvat credit must be supported by statutory amendments to Rules 57C and 57F(3), not merely by executive instructions.

Conclusion:
The Tribunal allowed the appeal, directing the authorities to restore the credit sought to be disallowed. The decision was based on the interpretation that the Modvat scheme and the provisions for export under bond should be read harmoniously, ensuring no duty burden on export products.