JAIKAMAL PAINTS Vs. COMMISSIONER OF CENTRAL EXCISE MADRAS

JUDGEMENT

(1.) THE question referred is as to whether Rule 57B of the Central Excise Rules as it existed in the year 1991 is applicable in respect of the inputs lying in stock at the time the manufacturer obtained acknowledgement of declaration made under Rule 57B.

(2.) THE assessee is a manufacturer of paints and varnishes which fall under Chapter XXXII of the Central Excise Tariff, 1985. During the financial year 1991-92 after availing full basic exemption upto NIL rate under the Notification No. 175/86 the assessee filed declaration under Rule 57G and opted for Modvat Scheme on 12-8-1991. THE assessee also claimed transitional credit of Rs. 4, 45, 460/- and Rs. 20, 499/- under Rule 57B in respect of the stock on inputs held by them as on 12-8-1991. That claim though initially allowed was subsequently rejected by the Asstt. Collector. Collector having allowed the appeal of the assessee, the matter was carried to the Tribunal which even while correctly expending the object and scope of Section 57B, ultimately held that the assessee was not entitled to the transitional credit under S. 57B. THE Tribunal took the view that Rule 57B is inapplicable for the purpose of determining the transitional credit under Rule 57B.

(3.) THE true purpose of Rule 57B can be said to be served only when the manufacture of the final product is induced to buy the inputs from small scale manufacturers by reason of the opportunity provided by law to avail a higher amount of credit even while actually paying a lesser amount by reason of the inputs having been manufactured by the small scale manufacturers. Such decision would be made by the manufacturer of the final product only after he decides to avail of the Modvat scheme and makes the necessary declaration. Rule 57B therefore is not applicable in respect of the inputs lying in stock with the manufacturer of the final product at the time such manufacturer obtains the acknowledgment of the declaration made by him under Rule 57B. We therefore, answer the question referred to us in favour of the Revenue and against the assessee.