GOODYEAR INDIA LTD Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS reference application under Section 35G(1) of the Central Excises and Salt Act, 1944 has been filed for referring to the High Court questions of law arising out Final Order No. A/731 -733/95 -NB, dated 11 -9 -1995. The brief factual background leading to the present decision is as follows:

(2.) THE Tribunal disposed of the appeals against the Commissioner's order by a common order upholding the order of the Commissioner. In so doing, the Tribunal followed its Larger Bench decision in the case of Kirloskar Oil Engines v. C.C.E., reported in 1994 (73) E.L.T. 835 in which it was held that in terms of Rule 57C of Central Excise Rules, Modvat credit is not admissible in respect of inputs which are used by an assessee in the manufacture of final product, which are fully exempt from the whole of the duty of excise leviable thereon and that if credit on such inputs is wrongly taken contrary to the provisions of Rule 57C, then it is liable to be adjusted in the RG 23A account maintained for Modvat credit purposes or it should be recovered from the assessee. The Tribunal in the Larger Bench decision, has noted the conflicting decisions of the Tribunal on the issue in the case of Commissioner of Central Excise v. Premier Tyres Ltd. (supra) and East India Pharmaceutical Works v. C.C.E., reported in 1991 (54) E.L.T. T55 as well as the Delhi High Court decision in the applicants' case in 1990 (49) E.L.T. 39 and Bombay High Court judgment in the case of Geoffrey Manners & Co. Ltd. v. Union of India And Ors. reported in 1980 (6) E.L.T. 7. The Larger Bench, thereafter, followed the Bombay High Court decision in arriving at the conclusion already stated above.

(3.) IT is also seen that the Western Bench of the Tribunal had, on an application by the Revenue in a similar matter, referred the points of law arising out of the order of that Bench of the Tribunal as reported in 1995 (80) E.L.T. 531. There, the issue related to the Tribunal's interpretation of the provisions of Rule 57C vis -a -vis Rule 57D of the Central Excise Rules relating to Modvat credit of duty paid on inputs used in or in relation to the manufacture of the final product in the context of Notification No. 217/86 as amended by Notification No. 97/89. This Notification exempts goods manufactured in a factory (referred to in the notification as inputs) used captively in the further manufacture of final products which are to be cleared on payment of duty in the same factory of production or in another factory of the same manufacturer. In the latter case, such inputs should be cleared under bond in terms of the procedure laid down in Chapter X of Central Excise Rules. In that case, the department denied Modvat credit of duty on basic inputs used in manufacture of intermediate goods removed to another unit under bond in terms of Notification No. 217/84. Since the intermediate inputs were cleared availing total exemption under the notification, the department was of the view that the Modvat credit barring Rule 57C is attracted. Negativing this contention, the Tribunal held that so long as the ultimate final product from the other unit of the same manufacturer is cleared on payment of duty, and where such intermediate inputs are used in such final ultimate product, there is no justification for denial of Modvat credit of duty paid on the basic inputs used through the medium of intermediate inputs in the ultimate final product.