1996 (10) TMI 297 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit and duty exemption under Notification No. 69/86-C.E.
2. Segregation of inputs and final products for availing exemption and Modvat credit simultaneously.

Analysis:
The case involved appeals by M/s. Powerflow Ltd. against an Order-in-Appeal by the Collector of Central Excise, Madras, regarding the availment of Modvat credit and duty exemption under Notification No. 69/86-C.E. for the same inputs and final products. The appellants sought to avail exemption for their final products "winding wires" made of copper under the said notification, subject to the condition of not taking credit of duty paid on certain inputs. However, when they later requested to avail the benefit of the notification for part of the inputs and final products, the request was rejected, directing them to avail the Modvat facility for the entire production. The Collector upheld this decision, stating that inputs cannot be partly duty paid and partly Modvat credited for the same manufacturer and factory.

During the hearing, the appellants argued that there was no bar under the Modvat scheme to partially avail exemption and pay duty for the same inputs and final products. They referenced a Supreme Court decision and a Board's clarification supporting their stance. On the other hand, the Revenue contended that for the same inputs and final products by the same manufacturer, either Modvat scheme or exemption could be utilized, not both simultaneously.

The Tribunal examined the case and noted that the appellants had filed a classification list seeking different duty rates for the same product under the notification and the Modvat scheme. The notification exempted winding wires made of copper meeting specific conditions, while Rule 57G required full disclosure of inputs for Modvat credit. The Board's clarification allowed credit for inputs used in exempted products if segregation was not feasible, but this did not apply to the current scenario. The Tribunal emphasized that the notification's condition of not availing Modvat credit was crucial, and the appellants had to pay duty as per the effective rate.

Referring to a Supreme Court case where Modvat credit reversal was permitted for exemption, the Tribunal distinguished the current situation where the appellants did not seek exemption for the entire production. As per the notification, no Modvat credit could be taken on the inputs, necessitating duty payment. The Tribunal upheld the Collector's decision, stating that either Modvat credit or exemption could be chosen, with exemption possible only after reversing Modvat credit. Ultimately, the appeals were dismissed based on the specific conditions and legal principles involved in the case.