1991 (9) TMI 185 - AT - Central Excise

Summary

Issues:
1. Eligibility of inputs used for the manufacture of Caustic Soda lye, eventually used for PVC resin, for MODVAT credit.

Analysis:
The appeal was filed by the Revenue against the order of the Collector of Central Excise (Appeals), Madras to determine whether inputs used for the production of Caustic Soda lye, further utilized in the manufacturing of PVC resin, are entitled to MODVAT credit under an exemption notification. The original authority and the Collector (Appeals) both concluded that as long as the conditions of the MODVAT procedure are met, credit cannot be denied merely because certain intermediary products emerge during the manufacturing process and are exempt from duty temporarily. The Collector (Appeals) emphasized that the term "final product" in Rule 57C should be interpreted concerning the manufacturer, not the marketability of the product. Therefore, the Collector (Appeals) confirmed that the caustic soda lye and flakes are not the final products of the manufacturer, allowing the benefit of Rule 57D(2) to the manufacturer.

The Appellant-Collector challenged the decision, arguing that caustic soda lye and flakes are not intermediate products as per Rule 57D(2) since they are the end products of the manufacturing process, not intermediate ones. The Appellant-Collector contended that since caustic soda lye and flakes are exempt from duty under specific notifications, MODVAT credit should not be available to the assessee as per Rule 57C. The Tribunal noted that the inputs were indeed used to produce caustic soda lye and flakes, which were subsequently utilized in a process exempt from duty. The Tribunal agreed with the lower authorities that the caustic soda lye and flakes should be considered as intermediate products under Rule 57C, making the manufacturer eligible for input credit due to their specific use in the manufacturing process.

The Tribunal emphasized that the determination of whether a product is intermediate or final should be based on the manufacturing process of the individual assessee. As long as it can be demonstrated that inputs were used to create in-process materials that further contribute to the final product, the materials produced from the inputs before being used in the final product's manufacture should be treated as intermediate products. Since there was no evidence to suggest that the caustic soda lye and flakes were not utilized as in-process materials for the declared final product, the Tribunal upheld the lower appellate authority's decision as legally valid and dismissed the Revenue's appeal.