ORDER
Jyoti Balasundaram, Member (J)
1. The Revenue is aggrieved by the order passed by the Commissioner of Central Excise (Appeals), Chandigarh remanding the case covered by the Order-in-Original No. 59-60/96 to the adjudicating authority for fresh decision with the directions to consider the plea of the respondents/assessees that they had filed a supplementary declaration on 29-9-1994 showing waste and scrap as final products along with cycle chains and moped chains and also to examine the admissibility of Modvat credit on inputs to the extent of duty leviable on scrap generated during the processing of inputs for the manufacture of cycle chains from 29-9-1994 onwards.
2. Briefly stated the facts of the case are that the assessees are engaged in the manufacture of moped chains and cycle chains both falling under Heading 7315 of the Schedule to the CETA, 1985. The assessee was taking credit of duty paid on the inputs used in the manufacture of moped chains exported under bond and the credit so taken got accumulated in the RG 23A Part II. Since cycle chains manufactured by the assessees are exempt, they were not availing credit of duty paid on inputs used in their manufacture. They were also maintaining separate records/accounts for both types of chains as well as for the scrap generated during the manufacture of each separate type of chains w.e.f. 1-3-1994. Scrap arising from the manufacture of cycle chains became dutiable and the assessee discharged duty liability thereon partly through PLA and partly through the accumulated Modvat credit. The Department was of the view that the assessee was required to deposit duty liability only through PLA as the final product viz. cycle chains was exempt from duty. Therefore, three demands were raised against the assessees for the period ranging from March 1994 to February 1995 and the demands were confirmed and penalty was also imposed under Order-in-original Nos. 58, 59 and 60/96. The lower appellate authority disposed of 3 appeals filed by the assessees. In the case of Order-in-original 58/96, he rejected the appeal of the assessee, but set aside the penalty, holding that Modvat credit earned on inputs which have been put to use for manufacture of moped chains exported under bond cannot be permitted to be utilised towards payment of duty on scrap generated from the manufacture of cycle chains, because cycle chains, and scrap arising therefrom was generated through processing of inputs separately accounted for on which no Modvat credit had been taken. In respect of Order-in-original No. 59 and 60/96, he remanded the matter, as seen from the opening paragraph of this order. The Revenue is aggrieved by the order of demand in respect of Order-in-Original No. 59 and 60/96.
3. I have heard Shri A.M. Tilak, learned DR and Shri Harbans Singh, learned Advocates.
4. It is brought to my notice by the learned Counsel for the respondents that the assessees had filed Appeal No. E/981/97-NB against the Commissioner (Appeals) Order-in-Appeal No. 1234/96 arising from Order-in-Original No. 58/96 and vide Final Order No. A/986/97-NB, dated 23-10-1997, the Tribunal has taken the view that duty could be paid from the accumulated Modvat credit. The reasoning of the Tribunal is contained in paragraph 10 of the order which is reproduced below :
“It is significant in this connection that in the case of Rule 57F(4), the words, “any inputs” in the sentence “credit of specified duty allowed in respect of any inputs may be utilised towards payment of duty of excise” are important and a comparison between sub-clause (i) and (ii) shows that only sub-clause (i) refers to the inputs intended to be used in accordance with declaration filed under sub-rule (i) of Rule 57G but sub-clause (ii) does not use these words and allows the aforesaid utilisation “on the waste, if any, arising in the course of manufacture of the final products”. Similarly, in the case of Rule 57F(5), the relevant words used are “any waste, arising from the processing of inputs, in respect of which credit has been taken may – (a) be removed on payment of duty as if such waste is manufactured in the factory”. In other words, these provisions did not relate merely to such inputs as are utilised in the manufacture of the declared final product which is cleared on payment of duty but with reference to any input which may be utilised for manufacture of the final products (i.e. to say, implying, any final product) and in waste arising from the processing of inputs. Again, that is to say, implying the inputs in respect of which credit has been taken. Learned Collector has referred to the words “such inputs” in clause (i) of 57F(4) but that clause is not applicable to the present case and the word ‘such’ has not been prefixed to the word ‘inputs’ or the final products in the relevant clauses 57F(4)(ii) and 57F(5)(a). Since the learned Counsel has stated and the Department has not contradicted the fact that in the present case, the inputs are the same for the purpose of manufacturing moped chains and cycle chains and Rule 57F(4)(ii) read with 57F(5)(a) allows the credit to be utilised for payment of duty on waste arising from the processing of inputs in respect of which credit has been taken, I consider that the appellants’ prayer is justified. In these circumstances, the duty could be paid from the accumulated Modvat credit in the absence of duty provision to the contrary. Learned Commissioner has rightly set aside the penalty in the circumstances of the case and sinces there is no dispute in this respect at this stage and the case is confined to the payment of duty from Modvat account, the Collector’s order in the later respect is set aside and the appeal allowed with consequential relief, if any due.”
5. Since it has already been accepted by the Tribunal that duty could be paid from the accumulated Modvat credit in the absence of any provision to the contrary, I see no reason to interfere with the order of the lower appellate authority and accordingly uphold the same and reject the appeals.