DEEJAY PLASTICS PVT LTD Vs. COLLECTOR OF C EX

JUDGEMENT

(1.) THIS appeal is directed against the order dated 30-6-1987 passed by the Collector of Central Excise (Appeals), Madras, by which he had partially allowed the appellants' appeal against the order passed by the Assistant Collector of Central Excise, Nellore Division, dated 5-3-1987 relating to availment of MODVAT credit by the appellants on their inputs.

(2.) The brief facts are that the appellants are manufacturers of multi layer plastic films for which the raw materials are polymers of ethylene in primary form. The appellants filed declaration on 29-3-1986 under Rule 57G of the Central Excise Rules for availing of the MODVAT Credit Scheme and requested for permission to avail of the MODVAT credit on inputs received by them during 1-2-1986 to 31-3-1986. The Assistant Collector in his order held that the finished product manufactured by the appellants namely multi layer plastic films were fully exempted upto 3-3-1986 under Notification No. 149/82 and became dutiable only from 4-3-1986 when the Exemption Notification was rescinded. The Assistant Collector invoked Rule 57C of the Central Excise Rules according to which no credit of input duty is allowed under MODVAT Scheme if the finished product itself is exempt. Therefore, inputs received prior to 4-3-1986 were held to be in-eligible for MODVAT credit. The order of the Assistant Collector was challenged in appeal before the Collector (Appeals) who held that the inputs received by the appellants which could be shown to have been utilized in the final product after the final product became dutiable, would be eligible for MODVAT credit in terms of the transitional provision contained in Rule 57H of the Central Excise Rules and as such part of the MODVAT duty was held to be admissible by the Collector (Appeals).

(3.) SHRI K.K. Bhatia, the learned S.D.R. appearing for the Department contended that the fundamental requirement for availing of MODVAT credit is that the finished product should not be exempt from duty. This position is in terms of Rule 57C of the Rules relating to Modvat credit. In the present case when the inputs were received by the appellants on which credit has been disallowed, the very final product was not subject to duty being exempt. In such case, there is no question, according to the learned S.D.R., of applying the transitional provisions contained in Rule 57H.