1997 (1) TMI 308 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit by the Collector (Appeals) on the orders passed by the Assistant Collector.
2. Dispute regarding the use of inputs declared for Modvat credit in the manufacture of soap.
3. Contention over the disallowed Modvat credit on caustic soda lye, activated carbon, and dicamol filter aid.
4. Interpretation of Rule 57C and Rule 57D(2) of the Central Excise Rules concerning Modvat credit on inputs for exempted final products.
5. Disagreement on the percentage of caustic soda lye contained in the soap stock cleared as exempted material.
6. Request for remand to the Assistant Collector to determine the quantity of caustic soda lye in the soap stock cleared as exempted material.

Detailed Analysis:
The case involves two appeals filed by the appellants against the order disallowing Modvat credit by the Collector (Appeals) based on the Assistant Collector's decision. The dispute arises from the use of inputs declared for Modvat credit in soap manufacturing, where discrepancies were found by the department regarding the actual utilization of certain inputs like caustic soda lye, activated carbon, and dicamol filter aid (paragraph 2).

The learned Advocate argued that all three inputs were indeed used in or in relation to soap production, challenging the disallowance of Modvat credit. He highlighted that the lower authorities failed to consider evidence and misinterpreted the usage of caustic soda lye in soap stock manufacturing (paragraph 5).

The main issues revolved around the interpretation of Rule 57C and Rule 57D(2) of the Central Excise Rules concerning Modvat credit eligibility for inputs used in exempted final products like soap stock. The judgment clarified that no Modvat credit would be allowed on caustic soda lye used in soap stock cleared as exempted material, applying Rule 57C due to the nature of the intermediate product (paragraph 10).

A significant disagreement existed regarding the percentage of caustic soda lye in the soap stock cleared as exempted material, with the appellants claiming 15% while the department asserted 40%. The judgment deemed this a factual matter requiring examination of records, thus warranting a remand to the Assistant Collector for verification (paragraph 11).

Ultimately, the appeal was remanded to the Assistant Collector to determine the exact quantity of caustic soda lye in the soap stock cleared as exempted material. The Assistant Collector was directed to review detailed records and provide an opportunity for the appellants to present their case before issuing a final decision in accordance with the law (paragraph 12).