1993 (11) TMI 164 - AT - Central Excise

Summary

Issues:
1. Withdrawal of Modvat facility for aerated waters under Chapter 2201.11 and 2201.12.
2. Recovery of Modvat credit taken and utilized for inputs still in stock post-withdrawal.
3. Interpretation of Rule 57F(1) and Rule 57-I(2) regarding utilization and payment of duty on inputs.
4. Applicability of previous case law and Tribunal decisions on similar matters.
5. Examination of inputs covered by Modvat scheme and duty recovery upon non-compliance.

Analysis:

The appeal before the Appellate Tribunal CEGAT, Madras involved the withdrawal of Modvat facility for aerated waters falling under specific chapters, leading to a dispute over the recovery of Modvat credit taken and utilized for inputs that were still in stock post-withdrawal. The Collector (Appeals) had ruled in favor of the Respondents, stating that the Modvat credit had been correctly taken and utilized, thus rejecting the Revenue's claim for recovery.

The Revenue contended that since the inputs were not used in the manufacture of the final product, the Modvat credit should not have been availed or utilized. They argued a contravention of Rule 57F(1) and Rule 57A, emphasizing that the inputs were not utilized as specified under the rules due to the withdrawal of Modvat facility for aerated waters post-stock availability.

On the other hand, the Respondent's Consultant relied on a Tribunal decision in a similar case, emphasizing that once the conditions for taking input credit were met, and the credit utilized as per Rule 57F, no fault could be found in the utilization of credit. The Tribunal held that there was no provision for recovery of Modvat credit upon withdrawal of the facility, and the inputs should be treated as the manufacture of the Respondent's factory, subject to duty upon clearance for home consumption.

The Tribunal, following the precedent set in a previous case, concluded that the recovery of Modvat credit for inputs in stock as of the withdrawal date was not warranted. They highlighted the importance of examining whether the inputs were still covered by the Modvat scheme and emphasized the duty recovery upon utilization in the specified finished product as per Rule 57A.

In essence, the Tribunal dismissed the Revenue's appeal, affirming that the Modvat credit had been correctly taken and utilized by the Respondents. They directed the Revenue to demand duty on the inputs upon utilization post-withdrawal of the Modvat facility, in accordance with Rule 57F(2) of the Central Excise Rules, 1944. The judgment emphasized the need for duty payment on inputs cleared for home consumption, treating them as the manufacture of the Respondent's factory.