1993 (12) TMI 158 - AT - Central Excise

Summary

Issues:
1. Admissibility of MODVAT credit on metal drums included in the value of Calcium Carbide.
2. Liability to pay duty or reverse MODVAT credit on metal drums.
3. Classification of metal drums as scrap or goods for duty purposes.

Analysis:
1. The appeal challenged the Collector of Central Excise's order regarding the admissibility of MODVAT credit on metal drums included in the value of Calcium Carbide. The appellants received Calcium Carbide in metal drums, paid duty on the composite value, and claimed MODVAT credit. The lower authority ordered recovery of MODVAT credit attributable to the cost of drums, considering them re-usable and sold separately. The Board's instructions dated 9-12-1986 deemed MODVAT credit on metal containers inadmissible. The issue revolved around whether the drums were eligible for MODVAT credit under Rule 57F for gases' manufacture.

2. The appellants argued against paying duty or reversing MODVAT credit, citing the absence of MODVAT Rules warranting credit reversal. The Department, represented by the learned SDR, supported the lower authority's decision, opposing the appellants' plea. The MODVAT Scheme allowed goods brought into the factory to be utilized or cleared out, subject to duty. The question arose regarding the treatment of drums under the Scheme, whether as goods cleared out or scrap generated during manufacturing.

3. The Tribunal observed that after taking MODVAT credit, the status of the goods changed, no longer considered duty paid goods but as if manufactured by the factory. However, what was removed were empty drums, not the original goods brought in. The empty drums cleared were not considered goods cleared under Rule 57F(2). Yet, for the purpose of using Calcium Carbide, the drums had to be opened, and the remaining empty drums were deemed scrap from the manufacturing process. Thus, the drums were classified as scrap under Rule 57F(4), subject to duty under the applicable tariff heading. The appeal was disposed of based on this classification, resolving the issue of liability for duty on the metal drums.