9911796707
TMI Blog1995 (10) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... taken and subsequently the finished products were cleared without payment of duty. The original authority ordered for reversal of the Modvat credit in respect of inputs which were lying in stock as the same were to be used in the manufacture of finished product which came to be cleared without payment of duty under exemption Notification 175/86 and also for the reversal of the Modvat credit or payment of the same by cash attributable to the inputs contained in the finished product lying as stock on the day they have opted for the benefit of Notification 175/86. The lower appellate authority upheld the order of the learned original authority holding that in terms of Rule 57C Modvat credit was not available in respect of inputs used in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil rate of duty. As the final products are wholly exempted in this case, credit on the inputs used in the said final products, which is exempted is not to be allowed in terms of Rule 57C. Therefore, the order of the CEGAT holding that Rule 57C will be applicable only to cases where at the time of receipt of inputs the finished goods can be cleared under a general exemption is against the express provisions of Rule 57C which speaks of such inputs actually used in the final products. In view of the above, whether the CEGAT is right in holding that credit is permissible in respect of inputs used in exempted final products in terms of Rule 57C. (ii) The CEGAT has relied on an earlier order in the case of M/s. Premier Tyres Ltd. without cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard by a larger Bench and the larger Bench in the case of Kirloskar Oil Engines Ltd v. Collector reported in 1994 (73) E.L.T. 835 has held that where Notification for clearance of goods at nil rate of duty existed at the time when the goods were received, in that case the benefit of Modvat credit in respect of inputs contained in the finished product cleared without payment of duty could not be allowed. However, they left open the question where the inputs had been received and exemption Notification in respect of final product has been issued after the date of receipt of inputs. We observe that in the present case the respondents had opted out of the Modvat Scheme and the Notification 175/86 itself does not rule out in case the final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, once the respondents opted out of the Modvat Scheme, duty should have been recovered in respect of the goods which are lying in stock under Rule 57F(1)(ii). We observe that after the inputs had been received in the assessee s factory and Modvat credit in respect of the same was taken, the goods therefore acquired the status of non-duty paid goods. Therefore, the proper course for recovery of the duty in respect of such inputs was in terms of Rule 57F(1)(ii). This provision should have been resorted to for recovery of duty as and when these inputs were taken into use for home consumption. It is in view of the above it has been held that the legal course available was not recovery of Modvat credit under Rule 57-I and the recovery should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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