1998 (10) TMI 242 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on glass bottles used in the manufacture of edible preparations.
2. Allegation of ineligible quantity of broken bottles and denial of credit.
3. Requirement to follow Rule 57F(4)(c) for disposal of waste.
4. Imposition of penalty on the Appellant.

Analysis:
1. The appeal challenged the denial of Modvat credit on glass bottles used in the manufacture of edible preparations. The Collector found ineligible broken bottles during the specified period, leading to a denial of credit amounting to Rs. 1,42,423.70. The issue revolved around whether these breakages occurred during filling operations or during the transfer of stock, impacting the eligibility of Modvat credit.

2. The Appellant contended that the breakages only occurred during washing and cleaning of the bottles in the production department, not during transit from the raw-material godown to the factory for filling operations. Citing relevant Tribunal decisions, the Appellant argued that bottles broken in the process of packing goods are eligible for Modvat credit under Rule 57G of the Central Excise Rules. This argument was crucial in determining the admissibility of the credit.

3. The Appellants clarified the stage at which the breakages occurred, stating that they took place in the production department during washing and cleaning before moving to the filling and capping machine. They admitted that any breakages during transit to the plant would not be eligible for Modvat credit. Based on this explanation and the Tribunal decisions, it was established that breakages at the filling operation stage are covered by Rule 57D, allowing for Modvat credit. The necessity to rework the demand as ordered by the Collector was deemed unnecessary, leading to the setting aside of the impugned order.

4. The imposition of a penalty on the Appellant was a consequential aspect of the case. However, since the appeal succeeded in establishing the eligibility of Modvat credit for bottles broken at the filling operation stage, the penalty imposed was likely to be reconsidered or revoked in light of the favorable judgment.