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TMI Blog1992 (2) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector of Central Excise (Appeals), Bombay. 3. Appeal No. E/404/90-Bom is directed against the Order-in-Appeal No. SKM-333/90-BI, dated 21-3-1990 passed by the Collector (Appeals), Bombay. 4. Appeal No. E/467/90-Bom is directed against the order of the Collector (Appeals) No. SKM-514/90-BI, dated 23-4-1990. 5. The facts involved in these appeals can be briefly stated as below. The appellants are manufacturers of paints and varnishes. They had cleared certain paints and varnishes to their customers like Larsen Toubro Ltd. However, part of the consignments were returned to them as rejected material. This return was done by their customers M/s. Larsen Toubro and others by way of debiting the MODVAT accounts, since on receipt of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the rejected materials. Hence the assessee have come in appeals against the said orders of the Collector (Appeals). Thus, from the aforesaid facts, the main issue involved, which emerges for consideration is whether the assessee is entitled to take MODVAT Credit on paints and varnishes, which are their finished product and which have been cleared on payment of duty, part of which were returned to their factory by their customers as rejected materials and subject to the process of re-conditioning and re-grinding and cleared under the MODVAT Scheme by payment of duty under RG-23A Part II. This is the question to be considered by us in the appeals. 6. We heard the elaborate arguments from both the sides. The main thrust of the argument of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Department s Appeal E/289/91-Bom against the Collector (Appeals) order allowing their appeal is required to be rejected. 8. After hearing both the sides, we have to take note of the legal position in the first instance. Under Rule 57A of the Central Excise Rules, 1944, inputs are permitted to be brought in under the MODVAT Scheme for use in or in relation to the manufacture of the final product. This necessarily involves in utilisation of the material brought into the factory, either in the manufacture of the final product or in relation to the manufacture of the final product. In this case the test to be applied is whether the rejected paints and varnishes have been so used. Though for the word manufacture , no comprehensive de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which separate legal provisions exist. Since the object of the MODVAT Scheme as reflected in Rule 57A is to give credit only in respect of such inputs, which are used in or in relation to the manufacture of the final product and not in the case of rejected materials, brought for the purpose of re-processing or re-conditioning, it will be difficult to accept the proposition that MODVAT Scheme could be utilised for such purpose. 9. We also considered the observations of the Collector (Appeals), citing the Boards circular. Though any such circular does not have a legally binding force, we looked into that. This circular is particularly with reference to metal products, where, on account of damage, the goods may have to be scrapped and mel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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