2026-VIL-1109-MAD-CE
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CENTRAL EXCISE High Court Cases

Central Excise - Eligibility of credit of Additional Excise Duty (Goods of Special Importance) paid on unprocessed nylon tyre cord fabrics under Rule 57C of Central Excise Rules, 1944 read with Notification No. 5/94-CE(NT) – Respondent availed MODVAT credit of additional excise duty paid on unprocessed nylon tyre cord fabrics used in manufacture of processed tyre cord wrap sheets, which are used in manufacture of tyres. The processed tyre cord wrap sheets were exempted from additional excise duty, and tyres attracted basic excise duty - Dept disallowed the credit, but the Tribunal allowed the appeals holding that the final product was tyres, which were not exempt from duty. The Revenue filed appeals - Whether the Respondent is eligible to take credit of additional excise duty (Goods of Special Importance) paid on inputs when the final product is exempt from such duty - HELD - Rule 57C provides that no credit of specified duty shall be allowed on inputs used in the manufacture of final products which are exempt from the whole of the duty of excise or are chargeable to nil rate of duty. The second proviso to Notification No. 5/94-CE(NT) provides that credit of specified duty insofar as it relates to additional excise duty shall be utilised only towards payment of duty of excise leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 on the final products – For the purpose of the MODVAT scheme, to claim credit there should be a nexus between the availment of credit and the dutiability of the final product - Unless the final product is chargeable to duty under the Act, credit for the specified duty on inputs cannot be availed. Tyres are not chargeable under the said Act, and the processed tyre cord wrap sheets are exempt from it. Either way, the bar under Rule 57C operates, and the credit cannot be utilised towards payment of MODVAT or basic excise duty - The respondent is not entitled to the credit of AED paid on unprocessed nylon tyre cord fabrics for claiming credit for discharge of its MODVAT liability - The CESTAT erroneously relied on the Notification No.13/2003, dated 01.03.2003 and the Board Circular dated 12.03.2003 and allowed the assessee appeals. The subsequent Notification and the Circular cannot be given retrospective effect so as to give a fresh right to the respondent since the law during the relevant period was unequivocal that the AED [GSI] credit could not be utilised for discharging any other liability – The Tribunal order is set aside and Revenue appeals are allowed
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