1996 (12) TMI 233 - AT - Central Excise

Summary

Issues:
1. Utilization of Modvat credit towards payment of duty on final product and scrap.
2. Disallowance of Modvat credit and recovery of duty for non-declaration under Rule 57G.
3. Consideration of declaration in Classification List and letter dated 17-3-1994.

Analysis:

Issue 1: Utilization of Modvat credit towards payment of duty on final product and scrap
The appellant availed Modvat credit on duty paid on aluminium sheets for payment of Central Excise Duty on aluminium tanks. The dispute arose regarding the utilization of the balance of Modvat credit towards the payment of duty on tanks and scrap arising during the manufacture of tanks. The appellant contended that Rule 57F permits the utilization of Modvat credit for duty on both the final product and scrap. The Tribunal agreed with this interpretation, allowing the appellant to utilize the Modvat credit for both purposes.

Issue 2: Disallowance of Modvat credit and recovery of duty for non-declaration under Rule 57G
The authorities disallowed Modvat credit and ordered recovery of duty due to the appellant's failure to file a declaration under Rule 57G for the aluminium scrap. The appellant argued that they had made a declaration in the Classification List and submitted a letter clearly indicating their intention, which the lower authorities had overlooked. The Tribunal found the failure to file a declaration in the prescribed form under Rule 57G as a technical error and accepted the appellant's evidence of declaration in the Classification List and the letter. Consequently, the Tribunal set aside the disallowance of Modvat credit and recovery of duty.

Issue 3: Consideration of declaration in Classification List and letter dated 17-3-1994
The Tribunal emphasized the significance of the appellant's declaration in the Classification List and the letter dated 17-3-1994 in establishing their compliance with the declaration requirements. The Tribunal found that the lower authorities had erred in not considering these declarations, especially considering the previous exemption status of the aluminium scrap. By acknowledging the validity of these declarations, the Tribunal overturned the disallowance of Modvat credit and ordered the appellant to be allowed to avail of the credit for the relevant period.

In conclusion, the Tribunal ruled in favor of the appellant on all counts, allowing them to utilize the Modvat credit for duty on both the final product and scrap, and setting aside the disallowance of Modvat credit and recovery of duty for non-declaration under Rule 57G. The Tribunal also addressed the issue of refunding a predeposit made by the appellant, contingent upon the resolution of the Modvat credit dispute.