1999 (3) TMI 130 - AT - Central Excise

Summary

Issues:
1. Whether Modvat credit of duty paid on flattened containers can be given to the appellants when reformed metal containers are exempted from duty.
2. Whether the final product of the appellants is the reformed metal containers or the prepared and preserved food put up in unit containers.

Analysis:
Issue 1: The primary issue in this case was whether the Modvat credit of duty paid on flattened containers could be granted to the appellants despite an exemption for reformed metal containers. The Central Government had issued a notification exempting reformed metal containers from duty. The authorities initially denied the Modvat credit, arguing that since the final product was the exempted reformed metal containers, the credit could not be allowed. However, the appellants contended that their final product was the prepared and preserved food put up in unit containers, which was dutiable. The Tribunal referred to a previous judgment in the case of M/s. Kaytis Food Preservers, where it was held that an exemption notification does not automatically change the nature of a duty-paid product. The Tribunal concluded that reformed metal containers were not the final product in this case, and therefore, the Modvat credit of duty paid on flattened containers should be allowed.

Issue 2: The second issue revolved around determining the final product of the appellants. The authorities argued that the final product was the exempted reformed metal containers, leading to the denial of Modvat credit. However, the appellants maintained that their final product was the prepared and preserved food put up in unit containers, which was subject to duty. The Tribunal examined the manufacturing process and concluded that the final product was indeed the food items and not the reformed metal containers. Since the appellants were clearing the prepared food by paying duty, the Tribunal held that denying the Modvat credit on flattened containers was unwarranted. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants, granting them the benefit of Modvat credit on duty paid on flattened metal containers.

In conclusion, the judgment clarified that the appellants were entitled to the Modvat credit of duty paid on flattened containers despite the exemption for reformed metal containers. The final product for the appellants was determined to be the prepared and preserved food put up in unit containers, not the reformed metal containers. The Tribunal emphasized that the exemption notification did not alter the dutiable nature of the products. As a result, the impugned order denying the Modvat credit was overturned, and the appeal was allowed with consequential relief to the appellants.