1998 (9) TMI 167 - AT - Central Excise

Summary

Issues:
1. Modvat credit on inputs/raw materials not utilized in the manufacture of final products.
2. Imposition of penalty for non-utilization of glass bottles in the manufacture of medicines.
3. Interpretation of Rule 57D of the Central Excise Rules regarding credit on specified duty for inputs contained in waste products.
4. Time-bar aspect in relation to the demands for duty and penalty.

Modvat Credit on Inputs/ Raw Materials:
The case involved manufacturers of medicines availing Modvat credit on inputs/raw materials used in the manufacturing process. The issue arose when it was discovered that the quantity of glass bottles received exceeded the quantity utilized in the manufacture of finished goods, with a certain amount being disposed of as 'glass scrap wastage.' The department contended that Modvat credit should not be allowed on unused inputs, leading to demands for duty and penalty under show cause notices. The Adjudicating authority upheld the demand on the grounds of insufficient evidence to support the claim of unused bottles getting damaged during processing.

Imposition of Penalty:
The Adjudicating authority set aside the demand and penalty on the basis of time bar but directed the examination of genuine losses and the establishment of acceptable norms for future levies. In another case, the authority upheld the assessee's claim under Rule 57D of the Central Excise Rules, stating that credit could not be denied based on the Tribunal's precedent. The authority dropped proceedings due to the acceptance of the assessee's contention on merits, despite the lack of documentary evidence regarding wastage during the manufacturing process.

Interpretation of Rule 57D:
The Appellate Tribunal agreed with the assessees that Rule 57D(1) of the Central Excise Rules applied in the situation, preventing the denial of credit on inputs contained in waste products during the manufacturing process. Citing a previous Tribunal decision, the Tribunal held that Modvat credit could be availed even on inputs rendered unfit for use during manufacturing.

Time-Bar Aspect:
The Tribunal also concurred with the assessees on the time-bar aspect, rejecting claims of suppression of facts or misstatements. It was noted that Central Excise Officers had been monitoring production figures and losses, indicating that the losses were not detected for the first time before the issuance of show cause notices. Consequently, the Tribunal upheld the impugned order on both merits and time bar, dismissing the appeals of the Revenue.