1998 (3) TMI 364 - AT - Central Excise

Summary

Issues:
1. Entitlement to Modvat credit for inputs used in the manufacture of fully exempted final products.
2. Relevant stage for taking credit of duty paid on inputs under Central Excise Rules.

Analysis:

Issue 1: Entitlement to Modvat credit for inputs used in the manufacture of fully exempted final products

The reference application sought clarification on whether Modvat credit can be disallowed when only a fraction of the inputs used in manufacturing final products are exempt from duty. The Tribunal cited the case of Kirloskar Engine Oil v. CCE, where it was held that Modvat credit cannot be claimed for inputs used in fully exempted final products. The appellant argued for a reference to the High Court based on a similar case involving Goodyear India Ltd. The Tribunal, considering the precedent, referred the question to the High Court of Punjab and Haryana for a decision. This issue revolves around the interpretation of Rule 57C regarding Modvat credit eligibility for inputs used in the manufacture of duty-exempt final products.

Issue 2: Relevant stage for taking credit of duty paid on inputs under Central Excise Rules

The second issue addressed in the judgment pertains to the stage at which credit of duty paid on inputs can be claimed under Rule 57A and 57C of the Central Excise Rules. The appellant argued that credit should be allowed at the stage when inputs are brought into the factory, even if it is uncertain whether they will be used in the manufacture of duty-exempt final products. The Tribunal, in line with previous references to the High Court, decided to refer this question for consideration. This issue raises the question of whether the timing of claiming credit should be based on input entry into the factory or on the certainty of their use in the final product exempt from duty.

In conclusion, the judgment addresses the issues of Modvat credit entitlement for inputs used in fully exempted final products and the relevant stage for claiming duty credit under the Central Excise Rules. The decision to refer these questions to the High Court reflects the need for clarity on these matters, considering the precedents and interpretations of relevant legal provisions.