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TMI Blog1991 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, the learned Collector (Appeals) however accepted the plea of the Respondents that in terms of Rule 57D(2) of the Central Excise Rules, MODVAT Credit taken for the inputs used in the manufacture of any intermediate product during the course of manufacture of specified finished product under Rule 57A was permissible and allowed the appeal of the Respondents. 3. The learned Appellant-Collector is aggrieved of the findings of the learned Collector (Appeals) and has urged in the grounds of appeal that as per the declaration filed by the Respondents, caustic soda lye is shown as the input for the manufacture of their final product calcined alumina and that the Respondents had utilised the credit of duty taken on caustic soda for paying duty on Aluminium for the manufacture of which calcined alumina was used. It has also been urged that MODVAT Credit in respect of Caustic soda lye was also not available for the reasons that intermediate product calcined alumina is not being solely captively consumed as an intermediate product in the manufacture of final product Aluminium, inasmuch as in terms of Rule 57D (2), intermediate product arising during the course of manufacture of final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Modvat and Central Excise concessions to Small Scale Units, on question No. 24 have clarified as under : "MODVAT Credit is not available if the final products are fully exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which are exempt from duty by a notification (e.g. an enduse notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of final products provided that credit of duty paid on the inputs used in such exempted products is debited in the credit account before the removal of such exempted final products. Similar procedure may be followed in respect of exports under bond where the manufacturer is simultaneously availing of full exemption under Notification No. 175/86-C.E." 6. He has pleaded that where part of the goods, which are exempted, were cleared out of the factory, the only requirement was that MODVAT Credit attributable to the input contained in the exempted goods would be required to be reversed and this was what the Respondents had actually don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. He has pleaded that even if the declaration was not in the proforma, the Respondents were eligible for the benefit of MODVAT Credit and cited the order of the West Regional Bench - reported in 1989 (44) E.L.T. 691, in the case of Khosla Cast Steel & Alloys Pvt. Ltd. v. CCE. 7. The points that falls for consideration are : (1) Whether the respondents had made proper declaration in respect of the inputs under Rule 57G for availing of MODVAT Credit in respect of aluminium manufactured by them, (2) Whether Aluminium hydrate and calcined alumina manufactured in the course of manufacture of aluminium and which are exempted from payment of duty and which go into the manufacture of aluminium, would dis-entitle the Respondents from the benefit of MODVAT Credit in respect of the inputs used for their manufacture under Rule 57C; and (3) In case the Respondents are covered by Rule 57D(2), whether by virtue of the removal of the portion of the goods outside the factory, the benefit of Rule 57D(2) would not be available to them. For consideration of these issues, it is necessary to advert to the manufacturing process of aluminium. In this connection, the process of manufacture as set out i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as intermediate product and the inputs declared and in respect of which MODVAT Credit taken is at issue go into the manufacture of the intermediate product. In the context of the operations of the Respondents and also the facts of this case that the Plant is an integrated Unit and the end-product is Aluminium with other intermediate product used for the manufacture of Aluminium emerging in between, it has to be held that the declarations filed by the Respondents were sufficient for the purpose of availing of MODVAT Credit. There is no dispute that all the inputs involved were declared to the authorities. There is also no dispute that these inputs for which credit was taken go into the manufacture of aluminium hydrate, calcined alumina and aluminium and both aluminium hydrate and calcined alumina ultimately after the processing result in the manufacture of aluminium. In this background therefore, the various declarations filed by them have to be seen together and if that be done, we observe that all the necessary inputs can be taken to have been declared for the manufacture of aluminium. The Respondents apparently at the initial stage of coming into force of the MODVAT Scheme cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon (or chargeable to nil rate of duty). Provided that such intermediate products are used within the factory of production in the manufacture of final product on which the duty of excise is leviable whether in whole or in part. It will be seen from the above that Rule 57D(2) carves out an exception to Rule 57C and in case intermediate goods used in the manufacture of the final products are exempted from payment of duty the assessees are not debarred from the benefit of MODVAT Credit. In this view of the matter, we hold that there is no merit in the plea of the Revenue that Rule 57D(2) cannot be invoked in the case of the Respondents. The next plea of the Revenue is that inasmuch as part of the exempted intermediate goods are being cleared from the factory, the Respondents would become dis-entitled to the benefit of MODVAT Credit are in respect of that portion of the goods which are captively consumed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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