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TMI Blog1996 (5) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... der Rule 57F(1)(ii) and the same will be received by the original manufacturer under Rule 173H and cannot be considered as inputs of the respondents as the same were cleared as finished goods as per the classification list and the same are not entitled for Modvat credit. I therefore, find force in the revenue appeal and the same is admitted." 2. The facts of the case, in brief, are that the appellants are engaged in the manufacture of aluminium slugs falling under Chapter Heading 7601.10 and were availing facility of Modvat credit. They were also availing Modvat credit facilities in respect of goods found defective and rejected/returned by the buyers on payment of duty which was remelted and converted into aluminium slabs, further rolled into sheets/strips within the factory of the appellants and again cleared on payment of appropriate duty. The Department was of the view that the goods can be received back in the factory only for the purposes of remaking reconditioning etc. and as the appellants were not undertaking these processes they were not entitled to take Modvat credit on the goods. The Additional Collector, Central Excise dropped the proceedings. On appeal, the Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver of gate passes on payment of appropriate duty and goods were cleared by the customers under Rule 57F(1)(ii). These goods were remelted and used in the manufacture of their final products by the appellants and hence in terms of Rule 57A read with Rule 57G the appellants are eligible for the credit of duty paid on the said goods received by them from their customers. As per Rule 57F(1)(ii), the said goods are treated as if they are manufactured by the customers and they had to pay appropriate duty. Accordingly the customers have paid duty and cleared the goods under gate passes. The appellants are eligible to such credit of duty as they have actually used the same in the manufacture of their final product. Once the goods are rejected on the ground that they cannot be put to use for the purpose for which the final products are meant, the same cease to be final products. The defective goods which are no longer the final products are actually used in the manufacture of fresh final products by the process of remelting etc. Under these circumstances, the defective goods are to be treated as inputs in terms of the provisions of Rule 57A, goods manufactured and consumed in the factory o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the like, intended or suited for preservation in a scrap-book: residue after extraction of oil from blubber, fish etc.: metal clippings or other waste: anything discarded as wornout, out of date, or useless . According to the same dictionary `scrap iron means `scraps of iron of use only for melting. It, therefore, follows that steel melting scrap would consist of old and discarded items of steel which are unfit for any use other than melting for extraction of metal. In this case recasting of the ingots after melting is indicative of the fact that the nature and the extent of the defect in the ingots in question was such that they had been rendered unfit for any use other than melting for retrieval of metal. Had the ingots used by the appellants for melting been usable for any other purpose such as re-rolling on account of the defects being minor, it would not have been prudent on the part of the appellants to melt them for recasting. We, therefore, accept the appellants claim that the steel ingots produced by them out of defective ingots could be deemed as having been produced out of `steel melting scrap entitling them to the concession under Notification No. 53/80." Ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture or in relation to the manufacture of paints and varnishes. If such a question is raised, we find that the answer cannot be given in favour of the assessee; because the processes are only to re-condition a defective material and cannot be said to bring into existence a distinct commercially known product. When it does not go, in or in relation to the manufacture of the final product, then it gets out of the Modvat Scheme at the threshold itself, namely Rule 57A. We also have to take note of the fact that unlike Rule 56A, where even convenient distribution of the final product is sought to be covered, in the case of Modvat Scheme, no such provision is made. The object of the Modvat Scheme is to avert the cascading effect of the input taxation on the value of the final product. When the object of the Scheme is as above, such a scheme cannot be construed to be the one of reimbursing the duty element to the assessee in respect of the returned materials which are subject to re-processing, for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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