SAWOTTAM ISPAT PRIVATE LTD Vs. COLLECTOR OF C EX

JUDGEMENT

(1.) THIS appeal is directed against the order dated 4.12.1987 passed by the Collector of Central Excise, Hyderabad by which he had directed under Rule 571 of the Central Excise Rules, 1944 that the appellants should reverse the MOD VAT credit amount of Rs. 1,49,936.14 because this was availed of irregularly. He also imposed a penalty of Rs. 5,000/- on the appellants under Rule 173Q of the Central Excise Rules.

(2.) The facts in brief are that the appellants manufactured steel ingots with the aid of electric induction furnace. They also manufactured other Articles viz. runners and risers. The raw material for manufacture of these goods, among others, is steel scrap. They filed a declaration on 5.6.1986 opting for Modvat facility in respect of steel scrap as an input for their final product. The Central Excise Officers on a visit to the appellants' factory on 16-1-1987 noticed that a quantity of 2685.895 MT of steel scrap had been taken for manufacture of steel ingots, runners and risers and the quantity of final product ob tained was 2206.731 MT of ingots and 79.234 MT of runners and risers. A total credit of Rs. 10,07,099.67ps was availed as Modvat credit which includes credit of Rs. 9,80.351.67ps on the scrap. The total duty payable on the 2206.731 MT of ingots and 79.234 MT of runners and risers is Rs. 8,30,415.53. After adjustment of the duty amount of Rs. 8,30,415.53 from the credit taken, a balance of Rs. l,76,684.14ps should be avail able. However, the officers found that this amount was not available in the books of ac counts. According to Rule 57F(3) only those final products in which inputs have been utilised on which credit has been taken are entitled to the use of the credit for paying the duty. Where on certain quantities of inputs no credit is available or taken, the final products coming out of these inputs are not entitled to the facility of utilisation of credit. Therefore, a show cause notice was issued to the appellants for having utilised excess credit towards payment of duty on other final products in contravention of Rules 57 F(3)(1) and 57-F(5) of the Central Excise Rules, 1944. The proceedings initiated cul , minated in the Collector's order which is now challenged in this appeal.

(3.) THE learned SDR, Shri. K.K. Bhatia, pointed out that in this case, the appel lants have taken deemed credit on the steel scrap. Deemed credit on this input was withdrawn with effect from 28.8.1986. THE deemed credit taken on the steel scrap is more than the duty paid by the appellants on their finished products at Rs. 315/- per MT. THErefore, there is bound to be an accumulation of credit with the appellants because the duty taken as credit on the scrap is at the higher rate of Rs. 365/- per MT. THErefore only those final products are entitled to utilise the credit which are manufactured by using the inputs on which deemed credit has been taken. THErefore, the Collector's order is correct.