1995 (6) TMI 130 - AT - Central Excise

Summary

Issues:
1. Whether the respondents should reverse MODVAT credit on inputs lying unutilized and in finished goods and scrap after starting availing benefit of Notification No. 1/93.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Madras was filed by the revenue against the order of the Collector of Central Excise (Appeals), Bangalore. The main issue in consideration was whether the respondents were required to reverse the MODVAT credit taken on inputs that were unutilized and also in finished goods and scrap after they began availing the benefit of Notification No. 1/93. The revenue contended that the respondents, who started availing the exemption notification in 1993-94, should have reversed the MODVAT credit taken on inputs lying unutilized and in the finished goods and scrap. The revenue argued that even though the respondents availed the benefit of the notification from 7-4-1993, they should be considered covered by the notification from 1-4-1993, necessitating the reversal of MODVAT credit as per Rule 57F.

The Departmental Representative (DR) argued that the respondents should have reversed the MODVAT credit on inputs as they started availing the benefit of Notification No. 1/93. However, the Consultant for the respondents contended that there was no obligation in the notification for the respondents to avail the benefit right from the beginning of the financial year. The Consultant argued that since the department allowed them to avail the benefit from 7-4-1993, they cannot be deemed to have availed it from 1-4-1993. The Consultant further argued that the question of reversing MODVAT credit would only arise when the respondents opted for the benefit of the notification for finished products and cleared the goods under the notification.

The Tribunal observed that the lower authority had found that the respondents had discharged their duty liability on the goods in question and cleared unutilized goods as required by Rule 57F(1)(i). Therefore, when the respondents began operations under Notification 1/93, there were no inputs with MODVAT credit lying unutilized. The Tribunal agreed with the Consultant that Notification 1/93 did not mandate the benefit to be applicable from the beginning of the financial year. Consequently, the Tribunal held that there was no merit in the revenue's appeal, and it was rejected.