MODI TYRE FACTORY Vs. CCE

JUDGEMENT

(1.) THE applicants have submitted that following points of law arise out of Tribunal's Order No. A/358/97 -NB dt. 28.2.1997:

(2.) ARGUING the Reference Application Shri Ravinder Narain, Ld. Advocate with Ms. Moonika Sehgal, Ld. Advocate submits that the applicant factory is engaged in the manufacture of automotive tyres and tubes including tyres and tubes for Animal Driven Vehicle; that the applicant is a unit of M/s. Modi Rubber Ltd., Modipuram engaged in the manufacture of tyres/tubes falling under Chapter 40 of the Central Excise Tariff Act, 1985; mat the applicant received various inputs like Synthetic Rubber, Carbon Black, Rubber Compound etc. for manufacture of tyres/tubes from M/s. Modi Rubber Ltd. on payment of duty of Central Excise and availed Modvat credit after complying with the required formalities; that during the period Jan '92 to April '92, the applicant received 461360 kgs of duty paid Compound Rubber as input for use in the manufacture of finished product; that the applicant took Modvat credit under Rule 57A; that the amount of credit taken was Rs. 32,95,965.84; that the Department issued a SCN on 21.5.1992 alleging that total duty paid Rubber Compound is used in the exempted/Nil duty goods and therefore, proposing disallowance of Modvat credit; that the appellant replying to the SCN submitted that the applicant will not reverse Modvat credit in respect of credit taken on inputs used in the finished product cleared to original equipment manufacturers at Nil duty being exempt under Chapter X Procedure; that the Supdt. confirmed that Modvat credit reversal is not necessary if part of inputs are used in goods exempted or cleared at Nil rate of duty; that the Asstt. Commissioner adjudicated the case and reduced the demand from Rs. 32,95,965.84 to Rs. 6,89,496.72 holding that Modvat credit is not to be denied on the total quantity of duty paying Rubber Compound but only for the quantity allegedly used in Exempted/Nil duty clearances; that the applicant had already reversed Modvat credit amounting to Rs. 3,42,821.27 "under protest" on insistence by the Deptt.; that the Asstt. Commissioner confirmed the demand of balance of Rs. 3,46,675.25; that on appeal before the Ld. Commissioner (Appeals), their appeal was rejected and the demand for the balance amount of duty was confirmed that when the applicant filed an appeal before the Tribunal, this Tribunal following the Larger Bench decision in the case of Kirloskar Oil Engines Ltd. v. CCE, Pune reported in, 1994 (73) ELT 835 :, 1997 (72) ECR 495 (T) held that credit under Rule 57A though correctly taken ought to be reversed once the goods have been used in certain final products that have been cleared under exemption notification following Chapter X Procedure.

(3.) COUNTERING the arguments of Ld. Counsel, Ld. DR Shri Sanjeev Srivastava submitted that the issue is finally settled by the Judgment of the Hon'ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. He submitted that the Hon'ble Supreme Court had similar facts before it inasmuch as the appellants before the Hon'ble Supreme Court were manufacturing enameled copper winding wires from duty paid copper wire bars. The appellants in that case sent copper wire bars on job work under Rule 57F(2) of Central Excise Rules, 1944 for converting them into copper wires above 6 mm diameter, the appellants manufactured copper wires above 6 mm and copper strips. The appellants also manufactured enameled winding wires. They availed credit of duty on copper wires above 6 mm diameter. They sold this wire in the market after paying appropriate Excise Duty. Some of this wire was converted into wires below 6 mm and partly they consumed this wire captively to manufacture enameled copper winding wire at the stage when the copper wires of less than 6 mm are cleared finally, the appellants reversed the Modvat credit availed by them on the copper wire above 6 mm. The Department alleged that reversal of credit entries was not permitted by the Rules and that the assessee was not entitled to remove the copper wires without payment of duty since credit of duty paid on the inputs used in the manufacture of copper wires had already been taken in accordance with Rule 57A. Once appropriate entries had been made in the register, there is no rule under which the process could be reversed. Since the credit has been taken for the duty paid on the inputs in the prescribed records, the assessee cannot be heard to say that no credit of duty has been taken by it under Rule 57A. The Hon'ble Supreme Court observed in para 6: