1998 (8) TMI 258 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57A and Rule 57B regarding Modvat credit.
2. Admissibility of notional higher credit under Rule 57B.
3. Impact of Notification No. 175/86 on Modvat credit entitlement.
4. Consideration of captive consumption for calculating concession under Notification No. 175/86.

Analysis:
1. The appeal involved a dispute over the entitlement of the appellants to 10% more duty than previously paid by their unit. The Asst. Collector held that the demand notice included a notional credit that was not allowed for inter-transfer of goods between the units.

2. The appellants operated two units, one at Naraina Industrial Estate and the other at New Rohtak Road, Anand Parbat. The issue was whether the unit at Naraina could avail Modvat credit for duty paid on inputs from the Anand Parbat unit. The Asst. Collector allowed Modvat credit under Rule 57A but denied the higher notional credit under Rule 57B.

3. The appellants argued that both units paid duty at the same rates specified under Notification No. 175/86. They claimed that the final product of one unit was used as an input by the other, making them eligible for Modvat credit. The Trade Notice No. 62/86 clarified that Modvat credit could be availed for goods on which duty was paid and used in the manufacture of final products in another factory.

4. The respondents contended that captive consumption was not considered for calculating concession under Notification No. 175/86. They argued that since captive consumption was not taken into account, the higher notional credit was rightly denied by the lower authorities.

5. The Tribunal analyzed Rule 57A, Rule 57B, Notification No. 175/86, and relevant case law. It noted that both units were entitled to the benefit of the notification and that the Trade Notice clarified the eligibility for Modvat credit. The Tribunal found that Modvat credit included higher notional credit under Clause 5 of Notification No. 175/86, and as there was no legal basis to deny it, the notional higher credit was held admissible. Consequently, the appeal was allowed, and the appellants were granted relief in accordance with the law.