1999 (11) TMI 258 - AT - Central Excise

Summary

Issues:
1. Modvat credit availed on inputs for a product not considered the final product.
2. Whether activities of the respondents amount to manufacture.
3. Admissibility of Modvat credit on exported inputs.
4. Application of Rule 57-F(4) of the Central Excise Rules.
5. Discrepancies between show cause notice and Order-in-Original.

Analysis:

Issue 1: Modvat Credit for Non-Final Product
The case involved the availing of Modvat credit on inputs for a product, 'CT Polymer,' which was not considered the final product as per the Modvat declaration. The respondents repacked the imported goods, which did not amount to manufacture under the Central Excise Act. The Order-in-Original confirmed the duty demanded and imposed a penalty, but the appeal to the Collector (Appeals) was allowed. The appeal argued that the activities did not constitute manufacture and that Modvat credit was inadmissible as the final product was not manufactured from the imported raw material.

Issue 2: Manufacturing Activities
The respondents argued that their activities, involving testing, checking, and repacking, did not change the character of the product and were beyond the scope of manufacture. The Order-in-Original described the processes as manufacturing, but the respondents contended that the removal of input for export under bond did not debar them from utilizing Modvat credit. The Commissioner (Appeals) upheld the case, stating that the respondents were eligible for Modvat credit for inputs exported under bond.

Issue 3: Modvat Credit on Exported Inputs
The Circular dated 31-12-1996 clarified that Modvat credit against the export of inputs under bond could be utilized similarly to a final product. The Board's position was that manufacturer-exporters were not debarred from utilizing credits for exported inputs, and the manner of credit utilization was governed by Rule 57F(4).

Issue 4: Rule 57-F(4) Application
The Collector (Appeals) upheld the respondents' case regarding the applicability of Rule 57F(i)(ii) and noted that the legislature regarded the assessees as manufacturers of the inputs. Rule 57F(4) did not restrict the use of credit for inputs exported under bond, and Rule 137 allowed for the export of goods without duty payment. The Order-in-Original and subsequent appeals supported the respondents' eligibility for Modvat credit on exported inputs.

Issue 5: Discrepancies in Show Cause Notice
The judgment highlighted discrepancies between the show cause notice and the Order-in-Original, noting that the authorities applied Rule 57F(i)(ii) to the case and upheld the respondents' claim. The appellant failed to demonstrate that the impugned order was contrary to the facts, leading to the rejection of the appeal and the disposal of the cross objection.

In conclusion, the appeal was rejected, and the impugned order was upheld based on the findings related to Modvat credit, manufacturing activities, and the application of relevant rules and circulars.