2001 (8) TMI 537 - AT - Central Excise

Summary

Issues Involved:
1. Transfer of Modvat credit under Rule 57H(3) of the Central Excise Rules, 1944.
2. Applicability of Rule 57H(3) to duty paid on cut tobacco used in the manufacture of cigarettes lying unexported.
3. Interpretation of Supreme Court's judgment in Eicher Motors Ltd v. Union of India regarding lapsing of credit.

Issue-wise Detailed Analysis:

1. Transfer of Modvat Credit under Rule 57H(3):
The appeal challenges the Order-in-Appeal confirming the Order-in-Original, which allowed the transfer of Rs. 58,82,628/- from the set-off register to the RG 23A Part-II register under Rule 57H(3)(b) of the Central Excise Rules, 1944. This transfer was for payment of duty towards clearances for home consumption, subject to fulfilling all Modvat rules conditions. However, the remaining credit of Rs. 19,49,226/- was rejected because it did not meet the criteria under Rule 57H(3).

2. Applicability of Rule 57H(3) to Duty Paid on Cut Tobacco:
The Commissioner (Appeals) held that the duty paid on cut tobacco used in manufacturing cigarettes lying unexported does not fall within Rule 57H(3). The rule permits credit transfer only for materials or component parts received by the manufacturer and lying unutilized immediately before the declaration under Rule 57G. Since the cut tobacco was already used in cigarette manufacture, it did not qualify for credit transfer under Rule 57H(3).

3. Interpretation of Supreme Court's Judgment in Eicher Motors Ltd v. Union of India:
The appellant argued that the Supreme Court's judgment in Eicher Motors Ltd. v. Union of India established that credit lying unutilized on 16-3-1995 should not lapse and should be transferred under Rule 57H(3). The judgment emphasized that rights accrued under the existing scheme should not be altered retrospectively. The appellant contended that since credit had already accrued and was in the proforma credit, it should be transferred to RG 23-A credit automatically.

Detailed Analysis:

Transfer of Credit:
The original authority allowed the transfer of Rs. 58,82,628/- but disallowed Rs. 19,49,226/- for reasons including prior disallowance, pending litigation, and unexported stocks of cigarettes manufactured from cut tobacco. The Commissioner (Appeals) affirmed this decision, noting that Rule 57H(3) does not cover duty paid on cut tobacco used in unexported cigarettes.

Supreme Court Judgment Distinguishability:
The Tribunal distinguished the Supreme Court judgment in Eicher Motors Ltd., noting that in that case, Modvat credit was already earned without dispute. In contrast, the appellant's case involved specific procedural requirements under Rule 56A and no exemption for credit on cut tobacco used in cigarette manufacture. The Tribunal concluded that since the cut tobacco was already utilized, the credit did not fall within Rule 57H(3).

Conclusion:
The Tribunal upheld the Commissioner (Appeals) and the Order-in-Original, confirming that the remaining credit of Rs. 19,49,226/- was rightly disallowed. The appeal was rejected because the transfer of credit under Rule 57H(3) applies only to unutilized materials or components before the declaration under Rule 57G. Since the cut tobacco was already used, the credit was not available, and the appeal was correctly rejected.