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2000 (6) TMI 297 - AT - Central Excise

Issues Involved:
1. Interpretation of Rule 57A for extending Modvat benefit for binding materials.
2. Consideration of declaration filed under Rule 57T for capital goods credit under Rule 57Q as a declaration under Rule 57G(i) for Modvat credit under Rule 57A.
3. Legality of the order passed by CEGAT regarding Modvat benefit and filing of declarations.

Issue 1 - Interpretation of Rule 57A for Modvat Benefit:
The reference application filed under section 35G(1) of the Central Excise Act questioned the interpretation of Rule 57A by the CEGAT Bench Order, specifically regarding the extension of Modvat benefit for binding materials. The department argued that the binding materials used for fixing the refractory electrical arc furnace do not qualify as inputs under Rule 57A or 57Q of the Central Excise Rules. The department contended that for Modvat credit under Rule 57A, the binding material must be considered as an input, falling under the exclusion clause of Explanation to Rule 57A. The department relied on Supreme Court decisions to support its argument, emphasizing that any item used for production or processing of goods cannot be considered an input for availing Modvat credit under Rule 57A. The Tribunal agreed with the department's interpretation, stating that the binding accessories used in the lining of refractories and electrical arc furnace do not qualify as inputs for the manufacture of the final product, thus not eligible for Modvat benefit under Rule 57A.

Issue 2 - Consideration of Declarations Under Different Rules:
The department also challenged the order passed by CEGAT regarding the filing of declarations under different rules for availing Modvat credit. The department argued that the assessee could have filed a declaration under Rule 57G(1) and that compliance with the legal requirements, including filing declarations, is mandatory before availing Modvat credit under Rule 57A. The department emphasized that the Modvat procedure is optional, but compliance with the law, including filing declarations, is essential before claiming the benefit. The Tribunal concurred with the department's argument, stating that the failure to comply with the legal requirements, such as filing the necessary declaration under Rule 57G before availing Modvat credit, renders the benefit under Rule 57A inapplicable to refractories and binding materials.

Issue 3 - Legality of CEGAT's Order and Reference Application:
The department sought a reference to the High Court under section 35G(1) of the Central Excise Act, challenging the legality and correctness of CEGAT's order regarding Modvat benefit and filing of declarations. The department contended that the answers to the questions raised in the reference application were negative, indicating that CEGAT's order was not legal, proper, or correct. The Tribunal, after perusing the relevant provisions and hearing both sides, concluded that the relief sought by the department was not in accordance with the provisions of section 35G(1) of the Central Excise Act. Therefore, the Tribunal rejected the application for reference, stating that no reference could be made under section 35G(1) in the present circumstances.

In conclusion, the judgment by the Appellate Tribunal CEGAT, Mumbai addressed the interpretation of Rule 57A for extending Modvat benefit, the consideration of declarations under different rules, and the legality of CEGAT's order. The Tribunal upheld the department's arguments regarding the eligibility of binding materials for Modvat credit under Rule 57A and the mandatory requirement of filing declarations before availing such benefits. The Tribunal rejected the department's application for reference, stating that it was not in accordance with the provisions of the Central Excise Act.

 

 

 

 

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