1998 (4) TMI 291 - AT - Central Excise

Summary

Issues:
1. Entitlement to take credit of duty paid on ammonia used for soda ash purification.
2. Interpretation of Rule 57C regarding credit on raw material used in manufacturing.
3. Application of Rule 49 and Rule 57G in determining the status of goods.
4. Consideration of limitation period for challenging credit claims.

Entitlement to take credit of duty paid on ammonia used for soda ash purification:
The appellant, a soda ash manufacturer, claimed credit for duty paid on ammonia used in purifying brine for soda ash production. The Collector disallowed the credit, citing exemption claimed under Notification 177/86 and Rule 57C. The appellant argued that ammonia was essential in the chemical reaction for soda ash production. Referring to precedents, the appellant contended that ammonia usage qualified as "in relation to the manufacture" under Rule 57A, making it eligible for credit upon soda ash duty payment.

Interpretation of Rule 57C regarding credit on raw material used in manufacturing:
The departmental representative argued that goods used for manufacturing and consumed internally are deemed removed under Rule 49, making them final products subject to Rule 57C. However, the Tribunal differentiated between captively consumed goods and those removed for levy of duty, emphasizing that internal consumption does not negate their input status. Precedents were cited to support the view that goods used in activities related to manufacturing are considered inputs, even if not directly part of the final product.

Application of Rule 49 and Rule 57G in determining the status of goods:
The Tribunal analyzed the scope of "in relation to the final product," emphasizing activities crucial for obtaining the final goods. It was established that purifying brine, necessary for soda ash production, constituted an activity related to manufacturing. The declaration under Rule 57G need not specify the manufacturing process, as long as inputs are declared for the final product. The Tribunal rejected the argument that ammonia had not been explicitly declared for brine purification, maintaining that the declaration encompassed its use in soda ash production.

Consideration of limitation period for challenging credit claims:
The appeal succeeded on the grounds of limitation, as the appellant had justified their credit claim for ammonia used in soda ash manufacturing in response to the Superintendent's inquiry. The Tribunal noted that the department was aware of the credit claim since 1986 and failed to challenge it promptly, leading to the conclusion that the notice issued in 1987 for credits from 1987 to 1991 was time-barred. The impugned order was set aside, and the appeal was allowed in favor of the appellant.