CHINNI ENGG. WORKS Vs. CCE, ALLAHABAD

JUDGEMENT

(1.) THESE are two appeals against the order dated 15.6.2001 passed by the Commissioner (Appeals), Central Excise, Ghaziabad. The issue in both the appeals relates to admissibility of modvat credit on the losses generated at the end of the job worker to whom the inputs were sent for processing under Rule 57F of the Central Excise Rules. Briefly stated the facts of the case are that the appellants are manufacturers of electric fans falling under Chapter Heading No. 84.14 of the Central Excise Tariff Act 1985 and are availing modvat credit under Rule 57A. They were receiving aluminium ingots as inputs and the same was being sent for job work under the then Rule 57F(2) read with Notification No. 214/86 -CE dated 2.4.86 for casting of parts of fans; but after the Job work, the job worker could not return the full quantity of inputs in the shape of processed parts of fans and waste and scrap. For the quantity not received by the appellants from the job worker, they claimed it as burning or melting loss during the process of casting of parts of fans. During the period 9.1.1996 to 11.2.1997 they had issued 23702.500 Kgs. of aluminium ingots and received processed fan parts weighing 21925.3 Kgs. from their Job workers out of the said quantity and the rest claimed as burning or melting loss @ 7.5% whereas 177.500 Kgs. not received by them. Pursuant to the show cause notices dated 15.4.1997, 1.7.1996 and 17.12.1996, they were asked to show cause as to why the irregular modvat credit to the tune of Rs. 15511/ - & Rs. 28693/ - along with due interest be not demanded and recovered from them under Rule 57 -I of the Central Excise Rules 1944 read with Section 11A of the Central Excise Act 1944 and a penalty should not be imposed under Rule 173Q(1)(bb) of the Rules for their willful availment of irregular modvat credit in contravention of Rule 57F(2) on the ground that the balance quantity was not used in or in relation to the manufacture of final product.

(2.) SHRI Rajesh Chibber, learned Advocate appearing on behalf of the appellants has contended that Rule 57A itself allows modvat credit against those inputs which were used in or in relation to the manufacture of the final product though co -relation of the input was not necessary; that the modvat credit deniable was only at the stage of input and not at the stage when the same had undergone some process either at the premises of the receiver of the inputs or at the premises of the Job worker to whom the inputs as such had been sent for processing for the manufacture either parts of final products or semi finished goods; that during the processing of a product at the job workers premises cultivation of wastage dependent upon the nature of inputs either liquid or in solid form and Rule 57B duly covered wastage whether visible or Invisible. In support of his contention, learned Advocate has relied on the decision in the case of Bharat Radiators Ltd. reported in : 1999 (112) ELT 918 wherein this Tribunal has allowed the modvat credit on loss of inputs during the processing at the job workers' premises on unwrought copper bars, unwrought zinc bars, copper cathodes, zinc ingots and lead Ingots sent for processing under Rule 57F; that the learned Advocate relied on another decision in the case of SKF Bearings (I) Ltd. reported in : 2001 (127) ELT 225 wherein the Tribunal has allowed modvat on waste and scrap of iron and steel (turning and shaving) arising in job worker's premises while grinding and finishing rough forgings of ball and roller bearings. Shri B.C. Mahay, learned JDR has appeared on behalf of the Revenue and he has reiterated the findings of the learned Commissioner (Appeals) and he also relied on the decision in the case of Rajiv & Co. reported in : 1995 (80) ELT 429 wherein this Tribunal has considered the loss of oxygen gas during filling of compressed oxygen in cylinders and has held that the loss does not fall within the purview of Rule 57D and, therefore, the Department was right in demanding duty on oxygen gas lost. After hearing the rival submissions, perusal of the records and the case laws relied on by both the sides. I find that the ratio of the cases relied by the learned Advocate is fully applicable in the present case and as such both the appeals filed by the appellants are allowed and the impugned orders are set aside. In view of this, the stay applications are also allowed.