1995 (4) TMI 154 - AT - Central Excise

Summary

Issues:
1. Eligibility of certain inputs for Modvat Credit under Rule 57A of Central Excise Rules.
2. Utilization of Modvat Credit on duty paid inputs for clearance of similar final products under Rule 191BB.

Analysis:
1. The appeal dealt with the eligibility of five disputed inputs - liquid nitrogen, tri-ethylene glocol (TEG), thermex, finor, and KEM Watreat for Modvat Credit. The appellants, engaged in manufacturing Polyester Staple fibre, claimed these inputs were used in or in relation to the final product. The Department objected, seeking reversal of credit amounting to Rs. 4,22,405. The advocate for the appellants argued that all inputs, except TEG, were integral to the manufacturing process. The Department contended that these inputs did not directly contribute to manufacturing. After hearing both sides, the Tribunal held that liquid nitrogen, thermex, finor, and KEM Watreat were eligible inputs for Modvat Credit, while TEG was not pressed for want of data.

2. The second issue revolved around the utilization of Modvat Credit on duty paid inputs for clearance of similar final products under Rule 191BB. The Department argued that Modvat Credit could not be used for products cleared under Rule 191BB, citing a reference application against a previous decision. The Tribunal examined the legal provisions and previous decisions, including the East Regional Bench's ruling in the case of Orissa Synthetics and Reliance Industries Ltd. The Tribunal concluded that Modvat Credit could be utilized for clearance of similar final products, even if some were cleared under Rule 191BB. It emphasized that goods cleared under Rule 191BB for export were not equivalent to goods wholly exempted or chargeable to Nil rate of duty. The Tribunal held that the objection from the Department on this ground was not sustainable and directed authorities to allow the credit for utilization in clearance of similar final products.

In conclusion, the Tribunal allowed Modvat Credit for liquid nitrogen, thermex, finor, and KEM Watreat, while dismissing the appeal regarding TEG. It also directed that Modvat Credit on duty paid inputs used for products cleared under Rule 191BB should be allowed for clearance of similar products for home consumption.