2000 (6) TMI 88 - AT - Central Excise

Summary

Issues:
- Whether testing of sensitivity and labelling of products before clearance constitute manufacture under the Modvat scheme.

Analysis:
1. Facts and Background: The appellants imported jumbo rolls of unexposed cinematographic film, cleared them on payment of CVD, and took Modvat credit against the CVD paid. The goods were sent to a job worker for slitting and cutting to size, followed by testing of sensitivity and labelling before being sold.

2. Revenue's Contention: The Revenue argued that testing and labelling were not part of the manufacturing process, and hence, the Modvat credit taken was erroneous. The lower authorities demanded duty on the Modvat credit claimed by the appellants.

3. Appellants' Argument: The appellants contended that testing and labelling were essential for making the goods marketable. They cited a previous Tribunal case to support their claim that such processes were incidental to the completion of the manufactured product.

4. Legal Interpretation: The Tribunal examined Rule 57F(3)/(4) and noted that the job worker could clear the goods if the manufacturing process was complete at their end. However, since the goods required testing and labelling, they had to be returned to the appellants' factory for these processes.

5. Revenue's Stand: The Revenue maintained that testing and labelling did not amount to manufacturing, as the goods were already in their final form after conversion by the job worker. They argued that the sensitivity had been finalized during the initial manufacturing stage.

6. Tribunal's Decision: The Tribunal considered the necessity of testing and labelling for making the goods marketable. They emphasized that quality control was crucial for sensitive products like cinematographic film. They also highlighted that Rule 57F(3)/(4) allowed for removal of goods from the job worker's premises, supporting the appellants' actions.

7. Conclusion: The Tribunal found that testing and labelling were integral to the completion of the manufacturing process for the films. They ruled in favor of the appellants, stating that the procedures followed were correct under the law. The impugned order was set aside, and the appeal was allowed with any consequential relief as per law.