1996 (11) TMI 165 - AT - Central Excise

Summary

Issues:
1. Whether carded/combed cotton comes into existence before spinning of the fiber into yarn.
2. Whether any rule of Central Excise Rules prohibits availing duty paid on viscose staple fiber under the Modvat scheme.

Analysis:

Issue 1:
The appellants contested the denial of Modvat credit on viscose staple fibers used in manufacturing cotton viscose blended yarn. The department argued that carded/combed cotton emerged as an intermediate product, not specified under Rule 57A, hence disallowing the credit. The Commissioner (Appeals) upheld this view. The appellant's advocate emphasized the continuous manufacturing process where cotton and viscose fibers were input, resulting in viscose cotton yarn. The JDR for the respondent contended that carded/combed cotton was excisable as an intermediate product, thus denying Modvat credit. The Tribunal found that carded/combed cotton did come into existence during the manufacturing process, leading to the denial of Modvat credit as the intermediate product was not specified under Rule 57A.

Issue 2:
The Tribunal examined whether the appellants could avail Modvat credit despite the nil duty on carded/combed cotton. It was observed that to claim benefit under Rule 57D, the intermediate product must be specified under Rule 57A. As carded/combed cotton was not listed under Rule 57A during the relevant period, the appellants were deemed ineligible for Modvat credit. Consequently, the Tribunal rejected the appeal, affirming the denial of Modvat credit to the appellants based on the non-specification of carded/combed cotton under Rule 57A.

In conclusion, the Tribunal determined that carded/combed cotton did arise as an intermediate product in the manufacturing process, leading to the denial of Modvat credit due to the non-specification of this intermediate product under Rule 57A. The appellants were deemed ineligible for the Modvat credit on viscose staple fibers used in the production of cotton viscose blended yarn.