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1996 (9) TMI 434 - AT - Central Excise
Issues:
1. Reversal of Modvat credit for exempted final products. 2. Interpretation of Exemption Notification No. 100/69. 3. Application of Rule 57D of the Central Excise Rules, 1944. 4. Reference to Larger Bench's decision in Kirloskar Oil Engines v. CCE. 5. Comparison with the decision in Chandrapur Magnet Wires (P) Ltd. v. CCE, Nagpur. Analysis: The appeal pertains to the reversal of Modvat credit for final products exempted from Central Excise duty. The case involves M/s. Union Carbide (I) Ltd., engaged in manufacturing Dry Cell Batteries exempted under Exemption Notification No. 100/69. The Collector of Central Excise (Appeals) held that the Batteries cleared were waste products, falling under Rule 57D of the Central Excise Rules, 1944. During the hearing, the appellants/Revenue argued that a Larger Bench decision in Kirloskar Oil Engines v. CCE supported their position. They contended that the Batteries were not waste products as they were fully manufactured and met the conditions of the Exemption Notification. The Tribunal analyzed the matter and found that the Batteries were not waste products when cleared for testing, as per the Notification. Referring to the Larger Bench's decision, the Tribunal held that the credit for duty-free final products was recoverable under Rule 57-I of the Central Excise Rules, 1944. Additionally, the Tribunal cited the Supreme Court's decision in Chandrapur Magnet Wires (P) Ltd. v. CCE, Nagpur, which emphasized debiting Modvat credit for inputs used in exempted final products. The Court clarified that the credit entry for duties paid on inputs for exempted products should be deleted in the accounts before removal of the final product. Consequently, the Tribunal set aside the Order-in-Appeal by the Collector of Central Excise (Appeals), Calcutta, ruling in favor of the Department. The appeal was allowed based on the interpretation of the Exemption Notification and the principles outlined in the Larger Bench's decision and the Supreme Court's judgment.
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