1996 (10) TMI 336 - AT - Central Excise

Summary

Issues:
Appeal against Commissioner of Central Excise (Appeals) order; Modvat credit on inputs; Wrong credit on specific items like caustic soda lye, ferric alum, sulphuric acid, nickle catalyst, and indiflo perlite filteraid; Adjudication order by Assistant Commissioner; Eligibility of inputs for Modvat credit; Interpretation of Rule 57D (2) of Central Excise Rules; Applicability of Tribunal decisions; Remand for findings on certain inputs.

Analysis:
The case involves an appeal against an order by the Commissioner of Central Excise (Appeals) regarding the eligibility of Modvat credit on specific inputs used in the manufacture of soap. The appellants were availing Modvat credit on inputs under Rule 57A Central Excise Rules but were found to have taken wrong credit on caustic soda lye, ferric alum, sulphuric acid, nickle catalyst, and indiflo perlite filteraid. The Assistant Commissioner issued a show cause notice and ordered the reversal of credit amounting to Rs. 8,42,869 under Rule 57-I of Central Excise Rules.

The Commissioner (Appeals) held that caustic soda lye is eligible for Modvat credit, but no findings were provided regarding other inputs like ferric alum, sulphuric acid, nickle catalyst, and indiflo perlite filteraid as mentioned in the Assistant Commissioner's order. The Tribunal, after hearing both parties, upheld the Commissioner (Appeals) order on caustic soda lye, emphasizing its essential role in the soap manufacturing process. The Tribunal highlighted the importance of Rule 57D (2) of Central Excise Rules, stating that the denial of Modvat credit on caustic soda lye was not justified as the conditions under the rule were met. The Tribunal also referenced a judgment of the Madras High Court supporting the appellants' case.

Regarding nickle catalyst, the Tribunal upheld the Commissioner (Appeals) order, citing the wide import of Rule 57A covering inputs used in or in relation to the manufacture of the final product. The Tribunal referred to a Larger Bench decision supporting the eligibility of catalyst as an input. However, findings on other inputs like ferric alum, sulphuric acid, and indiflo perlite filteraid were omitted by the Commissioner (Appeals). Therefore, the Tribunal remanded the matter back to the Commissioner (Appeals) to provide findings on the eligibility of these inputs for Modvat credit in accordance with the law and after hearing the respondents. The appeal was disposed of accordingly.