P.G. Chacko, Member (J) - (1.)The lower authorities disallowed Modvat credit of Rs. 99,422/ - to the appellants under Rule 57C of the CE Rules, 1944. Hence the present appeal.
(2.)The appellants are manufacturers of packaged tea which was dutiable till 28.2.1999 and was chargeable to 'nil' rate of duty from 1.3.1999. They had taken Modvat Credit in September 1999 on the strength of Rule 57E certificate issued by the Supdt. of Central Excise having jurisdiction over the input manufacturer (M/s. Hindustan Lever Ltd.). It was the differential credit on the inputs supplied to the appellants by M/s. Hindustan Lever Ltd. during the period 2.11.1998 to 17.12.1998, and utilized by the latter in the manufacture of packaged tea during 1998 -99 (before 1.3.1999). The final product manufactured out of such input was also cleared on payment of duty in 1998 -1999. The department took the view that differential credit of Rs. 99,422/ - had lapsed on 1.3.1999, the date on which the appellants' final product was exempt from payment of duty and, therefore, they were not entitled to avail such credit in September 1999. This view, which was based no Rule 57C, was contested by the assessee. The adjudicating authority and the first appellate authority rejected the assessee's case and upheld the department's view.
(3.)Learned Consultant submits that there was nothing in Rule 57C which could support the department's view inasmuch as the rule presupposed that no quantity of Modvat -availed input be allowed to be contained in exempted final product. The rule did not expressly or implicitly embody the principle of lapse of credit. Learned Consultant relies upon a plethora of judgments in support of these arguments.