1995 (5) TMI 166 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for Modvat Credit under Rule 57H.
2. Validity of original declaration for subsequent years.
3. Interpretation of clause (ii) under Rule 57H(1) and its deletion.
4. Alternative plea regarding declarations in classification lists.

Detailed Analysis:

1. Eligibility for Modvat Credit under Rule 57H:
The appeals centered around the eligibility of M/s. Sure Safe Glass Works Private Limited for Modvat Credit under Rule 57H for inputs contained in final products cleared on payment of duty after crossing the duty-free exemption limit under Notification 175/86. The appellants argued that they should be allowed credit for inputs in stock, in process, and contained in final products when they reverted to duty payment. The department contended that credit was only available for inputs lying in stock at the time of filing the declaration, not for those already used in manufacturing final products.

2. Validity of Original Declaration for Subsequent Years:
The appellants claimed that their original declaration filed on 8-11-1988 should remain valid for subsequent years, making further declarations unnecessary. They cited the Tribunal's decision in Wox Coolers Pvt. Limited v. Collector of Central Excise, which held that fresh declarations were not needed when the original declaration was filed but not availed due to small scale exemption. The department argued that specific declarations under Rule 57G were required each year.

3. Interpretation of Clause (ii) under Rule 57H(1) and Its Deletion:
The appellants contended that the deletion of clause (ii) under Rule 57H(1) on 5-5-1989 did not affect their eligibility for credit. They argued that the deletion was superfluous since the clause pertained to clearances after 1-3-1987, a date long past by the time of deletion. The department maintained that the deletion meant no credit could be extended for inputs used in manufacturing final products cleared after the specified date.

4. Alternative Plea Regarding Declarations in Classification Lists:
The appellants also argued that their declarations in classification lists each year should suffice for availing Modvat Credit, as they indicated their intent to avail Modvat after crossing the duty-free limit. The department countered that classification lists served a different purpose and specific declarations under Rule 57G were still necessary.

Judgment:
The Tribunal examined the submissions and relevant provisions. It found that the deletion of clause (ii) did not materially affect the appellants' case, as the surviving clause (i) of Rule 57H(1) was sufficient to cover inputs received on or after 1-3-1987. The Tribunal also noted that the earlier decisions in Konark Cement & Asbestos Ltd. and Okay Steel (P) Limited did not adequately address the provision regarding inputs received in the factory on or after 1-3-1987.

The Tribunal held that the appellants were entitled to Modvat Credit for inputs received on or after 1-3-1987, subject to verification by the Assistant Collector. It also accepted the alternative plea that the original declaration remained valid, following the Wox Coolers decision, and subsequent declarations were unnecessary. The Tribunal allowed the appeals, setting aside the impugned orders and directing verification of the credit of duty on inputs at the time of switching to duty payment after crossing the exemption limit.