CCE Vs. BALAJI MILLS LTD.

JUDGEMENT

(1.) THIS appeal filed by the Revenue is directed against the Order -in -Appeal No. 116/2001 (CBE)(GVN) dated 25.5.2001 passed by the Commissioner (Appeals) by which the Commissioner (Appeals) has allowed the appeal of the assessee by setting aside the order passed by the original authority. The original authority had disallowed the credit amount of Rs. 1,92,828 availed on capital goods by the assessee and directed the assessee to expunge the same.

(2.) THE brief facts of the case are that the assessee -respondents are manufacturers of cotton yarn classifiable under Heading 52 of the CETA, 1985. During the period from 1.3.97 to 31.8.97 they availed a total credit of Rs. 1,92,828 on capital goods received by them. It was alleged by the department that the assessees were also manufacturing plain reel hanks and yarn waste (hard waste) on which no excise duty was payable and hence they are not eligible for the credit of duty on the capital goods under Rule 57R during the period in question. Further, the said rule was amended vide Notification No. 46/97 -CE (NT) dated 1.9.97 and, therefore, during the said period, no credit of duty on the capital goods was admissible under Rule 57R as they had also manufactured and cleared plain reel hanks and yarn waste (hard waste) which were exempted from duty or chargeable to nil rate of duty. Since the respondents availed the credit on capital goods which were also used by them for goods which are fully exempted from payment of duty, show cause notice was issued to the assessees which culminated in the Order -in -Original passed by the original authority against which the party moved the Commissioner (Appeals) who by the order impugned had allowed their appeal. The Revenue is aggrieved by order of the lower appellate authority.

(3.) SHRI A. Jayachandran, learned JDR appearing for the Revenue referred to the grounds of appeal and submitted that the capital goods have been used for the manufacture of both dutiable and exempted final product during the period in question which would qualify for Modvat Credit under Rule 57Q only after amendment of Notification No. 6/97 (NT) dated 1.3.97 by Notification No. 46/97. In the Budget 1997 the word "expressly" was omitted from Rule 57R(1). Hence, the capital goods on which credit has been taken during the intervening period from 1.3.97 to 1.9.97 are not eligible for Modvat Credit. Further, Sub -rule (2) of Rule 57R speaks about credit not to be denied on the ground that intermediate products which arise during the course of manufacture of the final product and such intermediate products are for the time being exempt from the whole of duty, whereas in the instant case, the credit is sought to be denied inasmuch as the capital goods are used both in the manufacture of dutiable and exempted final products.