Decided on July 16,1991

Godavary Electrical Conductors Appellant
COLLECTOR OF C. EX. Respondents


V.P. Gulati, Member (T) - (1.) THESE two appeals are against the order of Collector of Central Excise (Appeals) and involve common issue. They are therefore taken up together for disposal.
(2.) THE short question that falls for consideration in the appeal is whether the inputs which were cleared from the manufacturers' end under Notification 208/83 without payment of duty could be taken to be eligible for the benefit of MODVAT Credit under Rule 57G(2) in terms of Government of India order allowing deemed credit in respect of the goods falling under Tariff Heading 7213.90 purchased from the market. The learned Collector (Appeals) has held that inasmuch as the goods did not suffer any duty, in terms of this order under Rule 57G(2), no MODVAT Credit can be taken. Rule 57G(2) for the purpose of convenience is reproduced below : "(2) A manufacturer who has filed a declaration under Sub -rule (1) may after obtaining the acknowledgement aforesaid, take credit of the duty paid on the inputs received by him : Provided that no credit shall be taken unless the inputs are received in the factory under the cover of a Gate Pass, an AR -1, a Bill of Entry or any other documents as may be prescribed by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 in this behalf evidencing the payment of duty on such inputs. Provided further that having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and supply of the said inputs in the country and any other relevant consideration, the Central Govt. may direct that with effect from a specified date, all stocks of the said inputs in the country, except such stocks lying in a factory customs area [(as defined in the Customs Act, 1962 (52 of 1962)] or a warehouse as are clearly recognisable as being non -duty paid, may be deemed to be duty paid and credit of duty in respect of the said inputs may be allowed at such rate and subject to such conditions as the Central Government may direct without production of documents evidencing the payment of duty; Provided also that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which appropriate duty as indicated in the documents accompanying the goods, has been paid."
(3.) THE learned Counsel pleaded that Rule 57G(2) proviso envisages that the goods should not have been paid nil duty for the purpose of availing the benefit of MOD -VAT Credit in terms of the instructions issued under the said Rule. He pleaded that in their case the goods which were brought as inputs had been cleared under an exemption notification and being wholly exempt can be taken to be duty paid goods and could not be taken to have been cleared on payment of nil rate of duty. In this context he relied upon the decision of the West Regional Bench in the case of Arun Auto Spring and Manufacturing v. Collector of Central Excise and Customs, Rajkot, reported in 1990 (48) E.L.T. 543 (Tri.). He referred to para 10 of the said order. He pleaded that the Tribunal in that order has clearly held that where the inputs were exempted, these were eligible for the benefit of MOD VAT Credit, as these could not be considered as having been cleared on payment of nil rate of duty. He also referred to order of this Tribunal in the case of Rapsri Engineering Industries Pvt. Ltd. v. CCE, reported in 1989 (43) E.L.T. 577. He pleaded that in the light of the decision of the West Regional Bench, the appeal has to be allowed. Shri P. Sunderaraju, the learned SDR adopted the reasoning of the learned lower authority and prayed that the appellants are not eligible for the benefit of MODVAT Credit.;

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