1999 (11) TMI 281 - AT - Central Excise

Summary

Issues: Interpretation of "common inputs" under Modvat Scheme

Analysis:
1. The appellants manufactured motor vehicles under different headings and filed declarations as required under Rule 57G of the Central Excise Rules, 1944. The dispute arose when officers observed that certain parts were exclusively used for one variety of vehicle, leading to demands and penalty allegations based on the belief that credit was used incorrectly. The Commissioner confirmed the demands, prompting the appeal before the Tribunal.

2. The Tribunal noted that if an input is used in the manufacture of more than one final product, the credit taken on that input can be used for payment of duty on either product. The appellants argued that the duty demanded did not consider credit on inputs common to both vehicles. The Tribunal remanded the matter to the Collector for further examination, emphasizing the need for a proper adjudication process.

3. The Commissioner's subsequent order allowed credit for common inputs used in both varieties of vehicles but denied claims where credit for one variety was used to pay duty on the other. This distinction reduced the original demand significantly. The appeal challenged this interpretation of "common inputs" by the Commissioner.

4. The dispute centered on the interpretation of "common inputs." The Commissioner's distinction between items bearing the same nomenclature usable in both vehicles was questioned. The intention behind the Modvat Scheme was debated, with the appellants arguing that certain parts should be considered common inputs for both vehicles.

5. Reference was made to a previous Tribunal order highlighting that credit allowed for any input could be utilized for duty payment on any final product for which the inputs were intended. The argument against making distinctions based on different varieties of the same input, like scrap, was presented to emphasize the broader principle of the Modvat Scheme.

6. The Tribunal concluded that the phrase "common inputs" should be interpreted in relation to the goods manufactured, rejecting overly restrictive interpretations. It was emphasized that the Modvat credit accumulated for one vehicle could still discharge duty on the product, even if restricted, ensuring no loss of revenue. As a result, the appeal was allowed with consequential relief granted.