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TMI Blog2002 (1) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the manufacture of the said motors. Duty was paid under protest. On adjudication, the Deputy Commissioner of Central Excise, Bangalore allowed refund of the duty paid under protest, but held that Modvat credit on the inputs used in the manufacture of said motors is inadmissible in terms of Rule 57C of Central Excise Rules. He rejected on the ground that the motors manufactured by the appellants have not suffered duty. According to him in the event of final product not having suffered duty, the appellants are not eligible to avail Modvat credit on inputs used in the manufacture of the same, in terms of Rule 57C of Central Excise Rules. While dismissing the appeal, the Commissioner (Appeals) held that in terms of Rule 57C of Central Excise Rules, the appellants are not eligible to avail Modvat credit on inputs used in the manufacture of goods which have not suffered the Central excise duty. Since they have become unsuccessful before the Commissioner (Appeals), they have come before us by way of this appeal. 3. Shri R. Nagaraja Sharma, Deputy Senior Manager, appearing for the appellants submitted that the motors were destroyed after duly intimating the Department and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ste, refuse or by-product arising during the manufacture of the final product, or that the inputs have become waste during the course of manufacture of the final product, whether or not such waste or refuse or by-product is exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty or is not specified as a final product under Rule 57A. (2) Credit of specified duty shall also not be denied or varied in case any intermediate products have come into existence during the course of manufacture of final products or the inputs are used in the manufacture of capital goods as defined in Rule 57Q and such intermediate products or capital goods are not chargeable to duty of excise." 5. In support of her contention she also referred to the decision of the High Court, Chennai in the case of CCE, Madras v. Union Carbide Ltd., reported in 2001 (129) E.L.T. 40. Particularly she drew my attention to the observation made therein while answering the question in the reference application filed by the Revenue. The observation is as under : - "The extent to which Modvat credit can be retained on inputs which are not ultimately cleared as part of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, it was held that since the cubes after test became non-excisable, being non-marketable, proportionate credit availed on the cement used in making them revisable. Remission of duty or permission in terms of Rule 49 was not an issue. In that case, neither permission was granted nor the goods were destroyed on obtaining permission from the Department. On the other hand, the decision relied upon by the party in the case of Inalsa Ltd. (supra) is squarely applicable to the facts of this case. 9. The Tribunal in the case of Inalsa Ltd. held that party is entitled to Modvat credit on inputs used in the manufacture of final product destroyed by fire accident on which remission of duty had been granted by the Department. The finding portion therein is in Para 4 of the said Order which is as under : - "4. The question is whether the conclusion of the lower authorities, that the final product was destroyed by fire, and therefore was not chargeable to any duty, and as such no credit on admissible in terms of Rule 57C Central Excise Rules, is correct. That Rule says that no credit shall be allowed if the final product is exempt from whole of the duty of excise 'leviable' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be exempted nor be regarded as goods charged to nil rate of duty. Similar view was taken by the Bombay Bench of the Tribunal to hold that Rule 57C is inapplicable in such situation. In the present case also the final product has not suffered duty only as a result of remission of duty given on fulfilling the conditions, therefore under Rule 49 which is not to be equated to a general exemption from duty on the goods being charged to nil rate of duty, in the light of the above precedents. Hence invoking Rule 57C, on the facts and in the circumstances of this case, is not sustainable. It is also to be noted that there is no dispute that the inputs have been put to the intended use in the manufacture of the declared final product. Even the department instructions in Bangalore Collectorate Trade Notice dated 19-9-1998 [1988 (37) E.L.T. 23] related only to raw materials on which Modvat credit has been availed, being destroyed in fire accident before they are used in the manufacture of final product and goes on to say that in such cases no Modvat credit is admissible. In the present case that stage is definitely past, the inputs having admittedly been used in the manufacture of final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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