1998 (1) TMI 151 - AT - Central Excise

Summary

Issues: Classification of iron drums for Modvat credit under Rule 57B of Central Excise Rules for captive consumption in a small scale industrial unit.

In the judgment delivered by the Appellate Tribunal CEGAT, Mumbai, the appellants, a small scale industrial unit, submitted a classification list for clearance of iron drums under Heading 73.10 of the Central Excise Tariff Act, 1985, for captive consumption in packing S.O. Dyes under Notification 175/86. They availed Modvat credit under Notification 175/86 read with Rule 57B of Central Excise Rules. The Assistant Commissioner of Central Excise held that the appellants were ineligible for higher notional credit since the drums were not received from another SSI unit. The Commissioner of Central Excise & Customs (Appeals) upheld the Asstt. Commissioner's decision. The appellants argued that higher notional credit should be available for input materials manufactured and consumed by an SSI unit, not just received from another SSI unit. The Tribunal noted that Rule 57B provides a unique facility to encourage purchases from small scale units, allowing higher notional credit. However, the purpose of Rule 57B is to incentivize manufacturers to buy inputs from SSI units. Since the appellants did not obtain the drums from another small scale manufacturer but manufactured them themselves, the purpose of the rule would not be served in the case of captive consumption. The Tribunal concluded that the findings of the lower authorities were justified, and the appeal was rejected.

This judgment addresses the interpretation and application of Rule 57B of the Central Excise Rules concerning the availability of higher notional credit for input materials in a small scale industrial unit. The Tribunal emphasized the unique nature of Rule 57B as a special facility to encourage purchases from small scale units, deviating from the basic Modvat credit scheme. The Tribunal highlighted that the objective of Rule 57B is to provide an incentive for manufacturers to procure inputs from SSI units. The judgment clarifies that the higher notional credit under Rule 57B is intended for inputs obtained from small scale manufacturers, as indicated by the heading of the rule. The Tribunal reasoned that in cases of captive consumption where the inputs are produced and consumed internally by the SSI unit, the purpose of the rule would not be fulfilled. Additionally, the judgment mentions that the Modvat scheme offers other reliefs for situations involving inputs produced and captively consumed. The decision underscores the importance of aligning the application of Rule 57B with its intended objective of promoting purchases from small scale manufacturers to avail higher notional credit, ultimately leading to the rejection of the appeal.