1997 (11) TMI 339 - AT - Central Excise

Summary

Issues Involved:
1. Utilization of Modvat credit for Caustic Soda Lye in the manufacture of Viscose Staple Fibre (VSF) and Sodium Sulphate.
2. Applicability of Rule 57D(1) of Central Excise Rules, 1944.
3. Requirement of apportionment of Modvat credit between VSF and Sodium Sulphate.
4. Interpretation of Rules 57A, 57D, and 57F of Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Utilization of Modvat Credit:
The appellants utilized Modvat credit for Caustic Soda Lye used in manufacturing both VSF and Sodium Sulphate. Initially, until 25-7-1991, Modvat credit was availed only for Sodium Sulphate as VSF was not a specified final product under Notification No. 177/86. Post 25-7-1991, with VSF being notified as a final product, the appellants started utilizing the entire Modvat credit for VSF.

2. Applicability of Rule 57D(1):
Rule 57D(1) states that credit of duty should not be denied or varied if part of the inputs is contained in any waste, refuse, or by-product arising during the manufacture of the final product. The appellants argued that Sodium Sulphate was a by-product and thus, under Rule 57D(1), they were eligible to utilize the entire Modvat credit for VSF.

3. Requirement of Apportionment of Modvat Credit:
The lower authority contended that Modvat credit should be apportioned between VSF and Sodium Sulphate based on the quantum of inputs used. The appellants had previously apportioned Modvat credit before VSF was notified. However, the appellants argued that such apportionment was unnecessary post-notification of VSF as a final product.

4. Interpretation of Rules 57A, 57D, and 57F:
- Rule 57A: Provides for the applicability of Modvat credit on specified inputs used in the manufacture of specified final products.
- Rule 57D: Ensures that credit is not denied for inputs contained in waste, refuse, or by-products.
- Rule 57F: Details the manner of utilization of inputs and credit allowed.

The Tribunal observed that the legislative intent behind Rule 57D(1) was to allow full Modvat credit for inputs used in the manufacture of the final product, even if part of those inputs resulted in by-products. The Tribunal held that the appellants' claim that Sodium Sulphate was a by-product was valid and supported by the lower authority's findings. Therefore, the Modvat credit should not be apportioned between VSF and Sodium Sulphate.

Conclusion:
The Tribunal concluded that the appellants were entitled to utilize the entire Modvat credit for VSF, as Sodium Sulphate was a by-product. The lower authority's order requiring apportionment of Modvat credit was set aside, and the appellants' appeal was allowed. Consequently, the department's appeal was dismissed.