1997 (3) TMI 215 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on Hydrochloric acid and Sulphuric acid.
2. Denial of Modvat credit of Rs. 2,20,500 under Rule 57G of the Central Excise Rules, 1944.

Analysis:

Issue 1: Denial of Modvat credit on Hydrochloric acid and Sulphuric acid
The appellant, engaged in soap manufacturing, appealed against the denial of Modvat credit on Hydrochloric acid and Sulphuric acid by the Collector of Central Excise (Appeals). The lower authorities held that these acids were used for refining glycerine, a by-product, and not directly in the manufacture of the final product, soap. However, the appellant argued that since glycerine, purified using these acids, is used in soap production, they are entitled to the Modvat credit. The Tribunal agreed with the appellant, stating that if inputs are used for purifying a by-product (glycerine) that is further used in manufacturing the final product (soap), the Modvat credit cannot be denied. Therefore, the appellant was deemed eligible for the credit on Hydrochloric acid and Sulphuric acid used in glycerine purification.

Issue 2: Denial of Modvat credit of Rs. 2,20,500 under Rule 57G
Regarding the denial of Modvat credit of Rs. 2,20,500 under Rule 57G of the Central Excise Rules, 1944, the appellant contended that they had filed the declaration before taking the credit and that the respondents did not consider their case under Rule 57H, which allows credit on inputs received before obtaining the acknowledgment of declaration. The Tribunal noted that substantive benefits cannot be denied due to procedural lapses. Since the inputs were received before the declaration was filed, and there was no issue of unavailability for verification, the matter was remanded back to the Assistant Commissioner for fresh adjudication. The Assistant Commissioner was directed to provide the appellant with a personal hearing and decide the case afresh, allowing the appeal by way of remand.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the Modvat credit on Hydrochloric acid and Sulphuric acid used in glycerine purification and remanding the case for reconsideration regarding the denial of Modvat credit of Rs. 2,20,500 under Rule 57G.