RAPSRI ENGINEERING INDUSTRIES 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 upheld the order dated 20-2-1987 passed by the Assistant Collector of Central Excise, Lal Bagh Division, Bangalore, denying the appellants deemed MODVAT credit on Copper Waste and Scrap of Aluminium and unwrought Copper which they had availed in terms of the direction of the Government of India dated 7-4-1986 issued under Rule 57G(2) of the Central Excise Rules, 1944. The amount of MODVAT credit which the appellants were asked to reverse on this ground was Rs. 1,62,321.52.

(2.) The appellants are engaged in the manufacture of machined and unmachined Copper-base Alloy castings and components falling under various sub-headings of the Central Excise Tariff Act, 1985. They used unwrought copper and waste and scrap of Copper and Scrap of Aluminium as inputs in the manufacture of the final products mentioned above. They opted for MODVAT with effect from 11-6-1986 after filing the requisite declaration under Rule 57G on 5-6-1986. In terms of Government of India, Ministry of Finance order dated 7-4-1986 issued under Rule 57G(2) of the Central Excise Rules, the appellants had taken deemed credit of duty on unwrought Copper and Waste and Scrap of Copper and Aluminium during the period from 11-6-1986 to 10-11-1986. However, the Department issued a Show Cause Notice on 22-8-1986 on the ground that deemed credit of duty in respect of Waste and Scrap of Copper falling under subheading 7402.00 cleared at 'Nil' rate of duty under Notification No. 172/84, dated 1-8-1984 and Aluminium Scrap falling under sub-heading No. 7602.00 cleared at 'Nil' rate of duty under Notification No. 182/84 dated 1-8-1984 is not permissible and that credit taken will have to be reversed. This is because the Government of India Order dated 7-4-1986 regarding deemed credit says that no such deemed credit can be taken where the inputs are clearly identifiable as non-duty paid and in this case the Department held that these inputs being exempt are so identifiable. The Assistant Collector on consideration of the appellants' reply to the charges ordere'd the reversal of the credit which was confirmed in appeal by the Collector (Appeals).

(3.) SHRI K.K. Bhatia, the learned S.D.R. appearing for the Department, argued that on a perusal of the three exemption Notifications referred to above for the materials in question, it is seen that Waste and Scrap is totally exempted and for the purposes of the exemption the Notification itself has an Explanation that all stocks in the country should be deemed as duty paid. This is because the exemption is designed on the condition that the scrap is manufactured out of a duty paid material. When such scrap is used as the input which has enjoyed such exemption, the learned S.D.R. urged that it can then be said that the material was clearly non-duty paid.