1995 (8) TMI 135 - AT - Central Excise

Summary

Issues:
1. Disallowance of higher notional credit under Rule 57B of Central Excise Rules.
2. Interpretation of Trade Notices 23/91 and 29/88.
3. Admissibility of Modvat credit in case of goods received from small scale manufacturers.
4. Authority's jurisdiction to examine duty liability on inputs.
5. Permissibility of higher notional credit under Modvat Scheme.

Analysis:

1. The appeal challenged the Collector of Central Excise (Appeals), Madras' decision to disallow the appellant's benefit of higher notional credit under Rule 57B of Central Excise Rules. The lower authority based its decision on Trade Notice 23/91, stating that the benefit should not apply when goods received as inputs were cleared under exemption Notification 180/88, and suppliers paid duty under Notification 175/86 with Notification 69/89. However, the lower authority allowed higher notional credit for an earlier period under Trade Notice No. 29/88. The Tribunal allowed the appeal without providing a detailed judgment at that time.

2. The appellant claimed Modvat credit for Aluminum Ingots received from suppliers who paid duty at a higher rate, justifying the higher notional credit under Rule 57B. The appellant argued that the suppliers could have availed exemption under Notification 180/88, but the Revenue questioned the higher notional credit. The appellant contended that if Modvat credit was permissible, it should be in accordance with Modvat Rules, not limited to duty actually paid. The Tribunal considered these arguments and the Revenue's position.

3. The Revenue, represented by the SDR, supported the lower authority's decision, citing the Board's clarification on Modvat credit admissibility when suppliers could clear goods duty-free under relevant notifications. The Revenue argued that since goods could have been cleared under Notification 180/88, the appellant should not have availed benefits under Notification 175/86 or higher notional credit.

4. The Tribunal analyzed the Modvat Scheme, emphasizing that it allows credit equivalent to duty paid for inputs received, with higher notional credit permissible under Rule 57B for inputs from small scale manufacturers. It clarified that authorities cannot question duty liability on inputs or the correctness of duty charged by suppliers. The Tribunal held that unless there are specific restrictions, full effect must be given to Modvat Scheme provisions, emphasizing its beneficial nature.

5. Ultimately, the Tribunal found the lower authority's order unsustainable, as there was no legal provision to deny higher notional credit under the Modvat Scheme. The Tribunal emphasized that Modvat credit should be granted in accordance with the Scheme's provisions, without authorities questioning the duty paid by suppliers. As a result, the Tribunal allowed the appeal, ruling in favor of the appellants.