1999 (12) TMI 274 - AT - Central Excise

Summary

Issues involved: Interpretation of Notification No. 49/94-C.E. (N.T.) u/r Rule 13 of Central Excise Rules, applicability of Rule 57C, admissibility of Modvat credit u/s Rule 57A, clearance of goods under bond at Nil rate of duty.

Summary:
1. The ld. Commissioner (Appeals) observed that clearance of goods under bond at Nil rate of duty under Notification No. 49/94-C.E. (N.T.) u/r Rule 13 was treated as clearance without payment of duty, invoking Rule 57C, leading to the rejection of the appeal by the assessee.

2. The appellants claimed credit of duty paid on inputs u/s Rule 57A for manufacturing D(-) Alpha Phenyl Glycine Chloride Hydrochloride, cleared without duty payment under bond as per Notification No. 49/94-C.E. (N.T.) u/r Rule 13. The Department contended that not reversing Modvat credit at clearance violated Rule 57C, disallowing credit for duty-exempt final products.

3. The appellant's counsel cited precedents where goods cleared under bond for export were not considered wholly exempt or Nil duty, allowing input credit. The Tribunal agreed, stating that goods cleared under bond without duty payment are not equivalent to wholly exempt or Nil duty goods, thus Rule 57C did not apply, allowing Modvat credit.

4. The Department argued for adherence to Notification No. 49/94, clearing goods at Nil duty, justifying the disallowance of Modvat credit based on Rule 57C, supported by a Tribunal decision. However, the Tribunal found the Notification allowed duty-free export, not equating to wholly exempt or Nil duty goods, thus Modvat credit was admissible.

5. The Tribunal, after considering the contentions and precedents, concluded that goods cleared under bond without duty payment were not in the same category as wholly exempt or Nil duty goods, hence Rule 57C did not apply. Disagreeing with the ld. Commissioner (Appeals) and following the appellant's cited Tribunal decisions, Modvat credit was deemed admissible, leading to the allowance of the appeals.