1995 (5) TMI 148 - AT - Central Excise

Issues Involved:
1. Whether the credit of Rs. 12,83,852.84 on account of MODVAT credit was rightly availed and recorded.
2. Whether the benefit of Notification No. 69/89 can be granted by holding that subsequent reversal of the credit taken but not utilized on the inputs is sufficient compliance.
3. Whether the demand raised in the show-cause notice for Rs. 12,83,852.84 should be dropped.
4. Whether the benefit of the MODVAT credit taken on the inputs and subsequently reversed to the tune of Rs. 5,04,930.97 can be granted to avail the concession under Notification No. 69/86.

Issue-wise Detailed Analysis:

1. Credit of Rs. 12,83,852.84 on account of MODVAT credit:
The appellants are engaged in the manufacture of Enamelled Copper Winding Wire from duty-paid copper wire bars. They send these bars for job work under Rule 57F(2) of the CE Rules, 1944, and avail credit of duty paid on copper wires above 6 mm. The appellants either sell these wires or convert them into wires of below 6 mm, which are then either sold or used internally. The MODVAT credit availed on the copper wire above 6 mm is reversed when the wires of less than 6 mm are cleared internally. The Assistant Collector issued show-cause notices demanding sums on the ground that the goods were cleared at nil rate of duty by wrongfully availing the benefit under the said notification, as the procedure of reversing the credit taken is not permissible.

2. Benefit of Notification No. 69/89:
The appellants argue that they reverse the MODVAT credit at the stage of internal clearance to comply with the condition of Notification No. 69/86, which stipulates that MODVAT credit should not be taken in respect of inputs used in the manufacture of final products to be cleared at nil rate of duty. The Revenue contends that such reversal is not permissible as per the MODVAT Rules, and the credit taken cannot be construed as credit utilized. The Tribunal agrees with the Revenue, stating that the MODVAT credit utilized cannot be reversed to avail the benefit of the notification, as there is no provision in the MODVAT Rules for such reversal.

3. Demand raised in the show-cause notice:
The show-cause notice demanded Rs. 12,83,852.84 on the grounds that the goods were cleared at nil rate of duty by wrongfully availing the benefit under the notification. The appellants' explanation was rejected by both the authorities, and the Tribunal upheld the Assistant Collector's order to disallow the credit, stating that reversing the credit to avail the exemption under Notification 69/86 is not permissible.

4. Benefit of MODVAT credit taken and subsequently reversed:
The appellants sought to avail the benefit of MODVAT credit taken on the inputs and subsequently reversed to the tune of Rs. 5,04,930.97. The Revenue's stand is that such reversal to utilize the benefit of concessional rate of duty is not permissible. The Tribunal concurs with this view, citing previous rulings which state that the MODVAT Rules do not provide for reversal of credit. The Tribunal confirms the findings of the lower authorities and dismisses the appeal, stating that the MODVAT credit utilized cannot be reversed to avail the benefit of the notification.

Conclusion:
The Tribunal dismissed the appeal, upholding the Revenue's stance that the MODVAT credit utilized cannot be reversed to avail the benefit of Notification No. 69/86, as there is no provision in the MODVAT Rules for such reversal. The demand raised in the show-cause notice for Rs. 12,83,852.84 was confirmed, and the benefit of MODVAT credit taken and subsequently reversed was denied.

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