1997 (10) TMI 128 - AT - Central Excise

Summary

Issues:
Admissibility of Modvat credit on glass bottles used in the manufacture of Aerated waters.

Detailed Analysis:

1. The appellants were engaged in the manufacture of aerated waters and other items, taking Modvat credit of duty paid on inputs for their final products. The Department observed that the glass bottles were not received in original packing condition and were not included in the assessable value. The Department issued a show cause notice (SCN) to the appellants regarding the admissibility of Modvat credit on glass bottles supplied with aerated waters.

2. The Collector, after considering the reply and hearing the appellants, confirmed duty demand on a certain number of glass bottles but dropped the demand on others. The Collector relied on CBEC Circulars allowing Modvat credit on glass bottles and tin containers. The Collector allowed Modvat credit on empty bottles but denied it on bottles filled with aerated waters based on Rule 57H(1)(b) restricting the benefit to inputs used in manufacturing final products.

3. The appellants argued that the Collector's distinction between empty and filled glass bottles was unwarranted. They contended that Rule 57H(1)(b) allowed Modvat credit for inputs used in the stock of output still in the factory. They referred to relevant case laws supporting their argument, including a Supreme Court decision on set-off of duty relevant to Modvat credit availment.

4. The Respondent Collector reiterated the findings of the Collector in the impugned order, supporting the denial of Modvat credit on filled glass bottles.

5. The Tribunal considered the submissions and reviewed relevant case laws. Referring to previous decisions, the Tribunal held that denial of Modvat credit on filled bottles was unwarranted. They cited cases where credit utilization was not required to be reversed when final products were withdrawn from the Modvat Scheme or became exempt from duty subsequently.

6. Based on the precedents and legal principles, the Tribunal concluded that the lower authority wrongly denied Modvat credit on filled glass bottles. They agreed with the appellants' argument against the unwarranted distinction made by the Collector. The Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellants in accordance with the law.