ORDER
G.R. Sharma, Member (T)
1. This is an appeal against the confirmation of the demand of duty of Rs. 9,7027-, disallowance of Modvat credit amounting to Rs. 10,310.40 and imposition of penalty of Rs. 10,000/-.
2. The facts of the case briefly stated are that the appellants are manufacturers of nickel scrap and other goods. It was noticed that the appellants had manufactured and cleared 2019 Kgs. of nickel scrap for captive consumption during the period 1-3-1986 to 1-4-1986. The appellants neither maintained accounts in respect of nickel scrap nor filed any C.L. or P.L. The department alleged that the goods were-not exempted by Notification No. 217/86 dated 2-4-1986 inasmuch as this notification was not covered by the provisions of Central Duties of Excise (Retrospective Exemption) Act, 1986. It was also alleged that during the period 1-3-1986 to 30-9-1986, the appellants availed Modvat credit amounting to Rs. 10,310.40 wrongly in respect of inputs nickel rounds/strips etc. used in the manufacture of nickel matrices. When a show cause notice was issued, the appellants replied that on the basis of Notification No. 217/86, the goods cleared by them were exempt from whole of duty of excise. They referred to the decision of this Tribunal in the case of Rapicut Carbides Limited reported in 1989 (41) E.L.T. 259 stating that the Tribunal held that Notification No. 217/98 (sic) was covered by the Central Duties of Excise (Retrospective Exemption) Act, 1986. It was .also contended that the waste and scrap which arose during the course of manufacture of articles of nickel was not excisable at all during the period in question. The Addl. Collector after hearing their submissions ordered as indicated above.
3. None appeared for the appellants. Shri M.P. Singh, ld. JDR represented the Revenue.
4. After hearing ld. JDR and after perusing the evidence on record, we find that the appellants manufacture nickel micro screens, the nickel waste and scrap is generated. During the period 1-3-1986 to 1-4-1986, the appellants cleared 2019 kgs. of nickel waste and scrap for captive consumption for their factory. We note that the allegation of the department was that the nickel waste and scrap was excisable and that during the period 1-3-1986 to 1-4-1986 there was no notification exempting this item and that the Notification No. 217/86 which exempted the duty on these products which are used for captive consumption in the same factory was not applicable from 1-3-1986 and was only prospective i.e. applicable from 2-4-1986 onwards. We have perused the relevant chapter headings under Chapter 75. We are in agreement with the lower authorities that the nickel waste and scrap will be dutiable under chapter sub-heading 7501.10. The question, therefore, remains the Notification No. 217/86 which was issued on 2-4-1986 will be effective retrospectively from 1-3-1986 or not. We have perused the decision of this Tribunal in the case of Rapicut Carbides Limited. In this case the Tribunal held that “Hence prima facie, we are satisfied that status quo ante as was prevalent prior to 1-3-1986 in respect of captively consumed goods within the factory was not to be disturbed, notwithstanding rescinding of Notification No. 188/75, because of the Retrospective Legislation giving retrospective effect to the Notification No. 217/86 dated 2-4-1986. Since we are prima facie satisfied that the authorities below have not applied the retrospective enactment properly, we grant an unconditional stay as to the prior deposit of duty demanded.” In view of the decision of the Tribunal, we hold that Notification No. 217/86 dated 2-4-1986 will be effective from 1-3-1986 in terms of Central Duties of Excise (Retrospective Exemption) Act, 1986, therefore on this allegation, we set aside the impugned order.
5. The second allegation is about disallowance of Modvat credit. In the case of the appellant, the final product is nickel micro screens and in the input is nickel. For manufacturing nickel micro screens, first matrices are manufacture from nickel. These matrices are converted into nickel micro screens. Thus, nickel which was used in the manufacture of matrices get ultimately used in relation to the manufacture of nickel micro screens. Nickel is obtained from market on payment of duty and nickel micro screens are cleared from the factory on payment of duty. The department alleged that no duty was paid on matrices for captive consumption and, therefore duty paid nickel used as inputs in the manufacture of matrices cannot be taken credit under Modvat scheme as no duty was paid on matrices. We note that under Rule 57D there is a provision that if at any intermediate stage a product arises which is for the time being exempt variation in credit taken need not be necessary. In this view of matter, we hold that the disallowance of credit on nickel used for the manufacture of matrices, is not sustainable in law.
6. Since the allegation No. 1 and 2 have not been confirmed, therefore, the question of imposition of penalty does not arise. Having regard to the above findings, the impugned order is set aside the appeal is allowed.