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TMI Blog2006 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... aid on the pig iron and foundry chemicals (inputs) as Modvat credit. 2. The manufactured castings were mostly sold after payment of excise duty. About 10% of the castings were also captively consumed in the manufacture of power driven pumps. 3. The captively consumed castings were exempt from duty under Notification Nos. 8/96 and 4/97. So were the power driven pumps (under Notification No. 16/96) or they were assessable at 'Nil' rate of duty. 4. While removing the castings for captive consumption, initially, the appellant worked out 8% of the value of PD pumps and reversed (debited) that amount from their outstanding Modvat credit. Subsequently, with the permission of the departmental authorities, amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as referred to the Larger Bench. The issue has, thus come before us. 7. We have perused the record and heard both sides. 8. During the hearing, the ld. Counsel for the appellant has pointed out that, in addition to the two judgments noted by the Southern Bench, in a third case of Merind Ltd. v. CCE, Mumbai - 2004 (173) E.L.T. 422 also the Tribunal took the same view and those decisions reflected a correct understanding of the legal provisions. 9. The submission of the ld. SDR is that in a catena of judgments, the Hon'ble Supreme Court as well as Tribunal have noticed the distinction between intermediate products and final products and have held that the emergence of an exempted intermediate product du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the relation of pig iron and foundry chemicals to the manufacture of PD pumps is quite remote. 11. As already noted, pig iron and foundry chemicals are inputs only in the production of castings. The Revenue has no case that castings are not a final product. The appellant had declared both castings and PD pump as two different final products. There cannot also be a case that castings are not final products, inasmuch as such a view would lead to non-levy of duty on castings sold by the appellant. 12. During the relevant period, there was no definition of 'final products' under Modvat rules. The scheme was that, under a Notification No. (5/94 issued under Rule 57A), items figuring under the various excise tariff h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e credit on inputs which went into the manufacture of captively consumed castings was only, on a proportionate basis, about 10% of the input credit i.e. about Rs. 2.3 lakhs. As against this, the duty demand raised by treating the PD pumps as the final product, works out to over Rs. 32 lakhs. Thus in effect, the levy is falling on the exempted PD pumps. 14. The above data also clearly brings out that what was proposed to be done under the show cause notice is not to "adjustment the Modvat credit taken on inputs" going into the manufacture of exempted goods. The absence of proportion between the credit (about Rs. 2.3 lakhs) taken on the inputs used in the exempted castings and the amount (Rs. 32 lakhs) sought to be recovered alone ..... X X X X Extracts X X X X X X X X Extracts X X X X
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