1998 (1) TMI 121 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on duty paid inputs utilized in the manufacture of exempted Carbon Electrodes under Notification 217/86.

Analysis:
The case involved a dispute regarding the denial of Modvat credit on duty paid inputs, including Calcined Petroleum Coke, Pitch, and Calcined Anthracite Coal, used in the manufacture of Carbon Electrodes, part of which were cleared on payment of duty as a final product, while the majority were used captively in the manufacture of aluminum exempted under Notification 217/86. The Revenue sought to deny the Modvat credit on the inputs used in the manufacture of Carbon Electrodes, arguing that since the final product, Carbon Electrodes, was fully exempted, the Modvat credit should be denied under Rule 57C of the Central Excise Rules, 1944.

The appellant's advocate argued that a similar issue had been addressed in their previous case involving printing ink utilized captively in the manufacture of printing aluminum foil, where the Tribunal allowed the Modvat credit on inputs. The advocate highlighted the Tribunal's previous decision, emphasizing that the final product, printed aluminum foil, involved multiple inputs manufactured in the same factory, which were essential components of the final product. The Tribunal in the previous case concluded that such inputs should be considered intermediate products under Rule 57D, not falling under the purview of Rule 57C.

The Revenue, represented by the SDR, relied on previous judgments to support their contention that inputs used in the manufacture of products further used in the final product may not be entitled to Modvat credit. However, the appellant's advocate cited another judgment where inputs used in the manufacture of miniature bulbs captively consumed in torches were allowed Modvat credit under Rule 57D(2), emphasizing the characterization of the product as an intermediate product.

Upon considering the arguments from both sides, the Tribunal concluded that the Carbon Electrodes could be characterized as intermediate products, falling under the provisions of Rule 57D(2). The Tribunal relied on previous judgments and allowed the appeals with consequential relief to the appellants. Additionally, the Tribunal distinguished a judgment cited by the Revenue, stating that it was not relevant to the present case as it involved a different scenario where the product did not participate in the manufacturing process of the final product.

In conclusion, the Tribunal allowed the appeals, granting Modvat credit on the duty paid inputs used in the manufacture of Carbon Electrodes, considering them as intermediate products under Rule 57D(2) and rejecting the Revenue's argument based on Rule 57C.