COMMISSIONER OF CENTRAL EXCISE Vs. INDCHEM ELECTRONICS

JUDGEMENT

(1.) This appeal preferred by the Revenue is directed against the Order -in -Appeal No. 259/97 (M) dated 17 -10 -97 passed by the Commissioner (Appeals) by which he has allowed the appeal filed by the assessee with consequential relief. This case has got a checkered history and this is the second round of litigation before the Tribunal, as the matter was once remanded back to the Commissioner (Appeals) vide CEGAT Final Order No. 2610/96, dated 7 -12 -96. The Tribunal while remanding the matter had observed that there was confusion as to the nature of the goods which were destroyed that is, whether the same were inputs as such or intermediate product or product which was in process and had not emerged as intermediate product. It was therefore observed that unless this position is clarified the position in law cannot be examined to decide the rival contention and the lower appellate authority was asked to decide the case de novo after calling for necessary evidence as to the nature of the goods which were destroyed and there after examine as to whether in terms of the Modvat Rules, whether Modvat credit already taken could be asked to be reversed and whether the proper course for the respondents was to seek remedy under Rule 49 of the CE Rules. The present impugned order is as a result of the de novo proceedings.

(2.) The brief facts of the case are that the respondents herein are manufacturers of electronic automatic exchanges viz. EPABX, RAX and SBM RAX etc. under tariff sub -heading 8517 of the CETA 1985. It was reported to the Range Supdt. on 24 -6 -93 that there was a fire accident in the factory premises of the assessee and as a result certain quantity of inputs valued at Rs. 1,46,79,988/ - was destroyed. The duty involved on such input worked out to Rs. 16,52,879/ -. However, the assessee took Modvat credit of duty, involved on such inputs in their RG 23A Part II and the same had also been utilized for payment of duty on the clearance of the finished product. In the instant case, the inputs in question were not actually used in the manufacture of the final products as the same were destroyed in fire accident whereas according to Rule 57A, Modvat credit is allowable only when the inputs are used in or in relation to the manufacture of the final product. Thus the assessee has not followed the procedure outlined under Rule 57A according to the department. In the impugned order the Commissioner (Appeals), relying on the decisions of the Tribunal in the case of CCE v/s. Foods, Fats and Fertilizers reported in 1989 (41) E.L.T. 277 (T), L & T v/s. CCE reported in 1992 (61) E.L.T. 510, Prem Pharmaceutical v/s. CCE, Indore reported in 1996 (88) E.L.T. 278 (T ) and CCE, Aurangabad v/s. Glindia Ltd. reported in 1996 (87) E.L.T: 73 (T), held that the inputs in the present case had become waste due to the fire accident during the course of manufacture and hence the provisions of Rule 57D(1) would squarely cover the case and in that view of the matter he held that there was no warrant to reverse the input credit taken. Aggrieved by the said order, the Revenue has come in appeal on the following grounds :

(3.) The learned DR reiterated the grounds of appeal and sought for allowing the department's appeal.