1999 (5) TMI 172 - AT - Central Excise

Issues:
1. Transfer of credit accumulated under Notification 432/86 to Modvat account.
2. Requirement of maintaining one-to-one correlation between inputs and final products.
3. Applicability of sub-rule (3) of Rule 57H for transferring unutilized credit to Modvat account.
4. Interpretation of the provisions under Rule 57H in relation to maintaining specific accounts.

Analysis:

Issue 1: Transfer of credit accumulated under Notification 432/86 to Modvat account
The appellant sought to transfer the credit accumulated under Notification 432/86 to the Modvat account following the rescission of the notification and the eligibility of naphthalene for Modvat credit under Rule 57A. The Assistant Commissioner, upheld by the Commissioner (Appeals), denied the transfer citing lack of one-to-one correlation between inputs and final products. However, the Tribunal, referencing the decision in Amal Products v. C.C.E., held that such correlation was not required under Notification 432/86. The denial of transfer based on this ground was deemed unjustified.

Issue 2: Requirement of maintaining one-to-one correlation
The Tribunal dismissed the Departmental Representative's argument based on the decision in J.K. Synthetics v. C.C.E., emphasizing that maintaining a one-to-one relation between inputs and final products was not a prerequisite under the relevant notifications. As no contrary decision was presented, the insistence on this correlation was deemed unjustified, leading to the rejection of the denial of credit transfer.

Issue 3: Applicability of sub-rule (3) of Rule 57H for transferring unutilized credit
The Departmental Representative cited a decision in C.C.E. v. Sirpur Paper Mills, asserting that transfer of credit is impermissible if not maintained in the specified RG 23 account. However, the Tribunal opined that the objective of sub-rule (3) of Rule 57H was to enable the transfer of unutilized credit to the Modvat account for manufacturers availing special procedures or exemptions. The requirement to maintain a specific account format was not found in Notification 432/86, leading to the conclusion that denial of credit transfer based on this ground was unwarranted.

Issue 4: Interpretation of provisions under Rule 57H
The Tribunal deliberated on the interpretation of Rule 57H, noting the differing views of the members in a previous case. Ultimately, it was concluded that the denial of credit transfer based on the absence of a specific account format was unjustified unless mandated by law. The Tribunal recommended a reconsideration of the decision in C.C.E. v. Sirpur Paper Mills, highlighting the importance of the purpose behind the rule in facilitating credit transfer for duty paid on materials used in manufacturing.

In conclusion, the Tribunal directed the matter to be presented before the President for further consideration and resolution.

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