1997 (2) TMI 297 - AT - Central Excise

Summary

Issues:
1. Appeal against recovery of Modvat credit by the Collector of Central Excise and Customs.
2. Eligibility of Modvat credit on wire rods received from a conversion agent.
3. Interpretation of Rule 57G(2) for deemed Modvat credit.
4. Admissibility of Modvat credit on inputs not subjected to duty at the receipt stage.

Issue 1:
The appellants challenged the order-in-original of the Collector directing the recovery of Modvat credit. The appellants, manufacturers of welding electrodes, availed Modvat credit on wire rods received from a conversion agent. The challans indicated the wire rods were cleared without excise duty payment under a specific notification. A show-cause notice proposed recovery under Rule 57-I due to the absence of duty paying documents for credit availing.

Issue 2:
The appellants argued that the conversion agent cleared wire rods without duty payment based on duty-paid billets from TISCO. They contended the challans should be treated as valid for Modvat credit, similar to other TISCO conversion agents. However, the Collector rejected this argument, stating the wire rods received had no excise duty paid, distinguishing them from other cases where Modvat credit was allowed.

Issue 3:
During the hearing, the appellants referred to a Larger Bench decision on deemed Modvat credit under Rule 57G(2). The Tribunal clarified that the rule aimed to cover cases where duty was not paid due to specific circumstances outlined in government orders. The Tribunal rejected a narrow interpretation of the rule solely for preventing revenue loss from clandestine clearances.

Issue 4:
The Tribunal analyzed the applicability of Modvat credit to inputs not subjected to duty upon receipt. Referring to the Larger Bench decision, the Tribunal highlighted specific situations where Modvat credit would be permissible under the rule. It emphasized that the rule encompassed inputs where duty was not paid for various reasons, including nil duty rate or complete duty exemption.

In conclusion, the Tribunal upheld the Collector's order, finding no fault in denying Modvat credit to the appellants for wire rods without excise duty payment. The appeal was dismissed based on the interpretation of Rule 57G(2) and the specific situations outlined for deemed Modvat credit eligibility.