1996 (6) TMI 189 - AT - Central Excise

Summary

Issues:
1. Stay application for order of Commissioner (Appeals) dated 25-9-1995.
2. Validity of modvat credit availed on carbon electrodes and nipples.
3. Interpretation of Rule 57G regarding filing of declaration for credit.
4. Distinction between graphite electrodes and carbon electrodes.
5. Imposition of penalty under Rule 173(1)(b).

Analysis:
1. The case involved an application for stay of the order of the Commissioner (Appeals) dated 25-9-1995, which was examined along with the main appeal due to the settlement potential of the main issue at that stage.

2. The appellants, engaged in manufacturing iron and steel products, declared graphite electrodes and nipples as eligible inputs under Rule 57G but were using carbon electrodes and nipples for which modvat credit was availed. A show cause notice sought recovery of the credit availed on carbon electrodes for a specific period. The original authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the present appeal.

3. The appellants argued that graphite electrodes and carbon electrodes were of the same property falling under Heading 85.45. They contended that the declaration filed for graphite electrodes should cover carbon electrodes as well, as per Rule 57G(5) allowing subsequent declarations subject to satisfaction of the Assistant Collector. The appellants claimed they had filed a declaration for carbon electrodes within the prescribed period, which was accepted by the original authority for a subsequent period as well. The Commissioner (Appeals) rejected the appeal based on a chemical difference between graphite and carbon electrodes, but the Tribunal found the benefit of Rule 57G applicable for the impugned period.

4. The Tribunal upheld the distinction between graphite electrodes falling under Tariff Item 67 and carbon electrodes under Tariff Item 68, as highlighted in the judgment cited by the Collector. Despite the chemical difference, the Tribunal acknowledged the validity of the appellants' claim under Rule 57G for the period in question.

5. Regarding the penalty imposed under Rule 173(1)(b), the Tribunal found it unjustified as the appellants had legitimately availed the modvat credit. Consequently, the Tribunal set aside the demand for duty and the penalty, ruling in favor of the appellants based on the correct interpretation of Rule 57G and the absence of grounds for penalty imposition.

This detailed analysis of the judgment addresses the issues raised in the case, focusing on the interpretation of relevant rules and the distinction between the types of electrodes involved in the manufacturing process.