1996 (10) TMI 229 - AT - Central Excise

Summary

Issues:
The appeal challenges the rejection of a refund claim by the Assistant Commissioner, Central Excise, MOD-VI, New Delhi, regarding the destruction of final products in a fire accident and the denial of Modvat credit on inputs used in the manufacturing process.

Refund Claim Rejection:
The appellants, manufacturers of food processors under the Modvat Scheme, had utilized inputs in manufacturing final products, with the duty credit used for products cleared before a fire accident. The lower authorities concluded that since the final product was destroyed by fire and duty remitted under Rule 49 Central Excise Rules, no credit was admissible under Rule 57C Central Excise Rules. However, the Tribunal decision in Reliance Industries v. Commissioner of Central Excise supported the appellants' claim, citing precedents where Rule 57C was deemed inapplicable in similar situations. The appellants were granted Modvat credit on inputs used in the destroyed final product due to the remission of duty, leading to the setting aside of the impugned order and allowing the appeal.

Modvat Credit Denial:
The key question was whether the remission of duty on fire-destroyed finished goods would be covered by Rule 57C. The appellants argued that the remission under Rule 49, not equated to a general exemption from duty, did not warrant the denial of Modvat credit. Precedents from the Calcutta and Bombay Benches of the Tribunal supported this argument, emphasizing that Rule 57C did not apply in cases where final products were destroyed due to remission of duty. The appellants were found entitled to Modvat credit on inputs used in the manufacturing process of the destroyed final product, as the remission of duty was granted by the department.

Conclusion:
The appellate tribunal ruled in favor of the appellants, allowing Modvat credit on inputs used in the manufacturing of final products destroyed by a fire accident, despite the remission of duty under Rule 49. The decision was based on the interpretation of relevant rules and precedents, ultimately setting aside the lower authorities' rejection of the refund claim.