1996 (10) TMI 256 - AT - Central Excise

Summary

Issues:
Grant of Modvat credit in respect of inputs contained in waste arising during the manufacture of HDPE woven sacks.

Analysis:
The appeal in question revolves around the grant of Modvat credit concerning inputs found in waste produced during the manufacturing process of HDPE woven sacks. The appellants received duty paid granules that underwent various processes, ultimately being used in sack production. The waste generated during manufacturing was cleared without duty payment under Notification No. 53/88.

The learned Consultant for the appellants argued that since the granules initially incurred duty and Modvat credit was claimed, the duty paid status remains unchanged. Referring to the notification's conditions, he contended that the benefit should not be denied based on a change in the granules' identity due to the Modvat credit taken. He emphasized that no provision prohibits applying the notification's benefits in such a scenario.

Contrarily, the Department's JDR cited a Supreme Court judgment (Chandrapur Magnetic Wires (P) Ltd. v. Collector of Central Excise, Nagpur) where a similar situation was addressed. The Court ruled that if Modvat credit on inputs is reversed, the exemption can be granted. In this case, since Modvat credit on granules was not reversed, seeking exemption solely because the goods once incurred duty was deemed insufficient.

The Tribunal observed that Rule 57F mandates treating Modvat credited inputs as manufactured by the appellant, requiring duty payment upon clearance. Thus, the granules, despite previous duty payment due to Modvat credit, cannot be deemed duty paid for the notification's purpose. The Tribunal aligned with the Supreme Court's judgment, stating that only reversing the Modvat credit on granules would entitle the appellants to the notification's benefit, which was not done in this case. Consequently, the appeal was dismissed.