9911796707
TMI Blog2000 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ective metal containers. The issue has been referred to this Larger Bench on account of differing views expressed in the decisions of the Tribunal. 2. The ld. Commissioner (Appeals) took the view that the decision of the Tribunal in Alcobex Metals Ltd. v. CCE - 1993 (68) E.L.T. 146 applied to the case of the respondents and that Modvat credit was admissible. As against this, the Commissioner, CCE Meerut has submitted that the assessee is not entitled to Modvat credit in view of the decisions of the Tribunal in the case of I.C.I. v. CCE, Calcutta - 1997 (89) E.L.T. 216 and CCE, Bangalore v. Krishna Fabricators Pvt. Ltd. - 1996 (84) E.L.T. 304. The Commissioner has relied on the following observations in these decisions : "Process of conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as original process, from the rejected goods. The process is not removing of defects. In view if this factual position the Commissioner held that the case covered by Tribunal's decision in Alcobax Metal Ltd. case. 4. In the Alcobax Metal case, the assessees were manufacturers of Copper Alloy products like bars/rods, sections, wires, pipes and tubes etc. In certain cases purchasers returned goods to the manufacturer on the ground that they were defective. On receipt of the goods, they were used by them in the manufacture of fresh products by remelting the same in the factory. Modvat credit had been taken on the returned goods treating them as inputs. Credit was denied on the returned goods on the ground that they were final products thems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rejected seat kushy. 5. During the hearing ld. Counsel representing the respondents submitted that under Rule 57A all goods used in the manufacture of final products are elgible for Modvat credit. There is no restriction that if duty had been paid on a final product the same cannot be treated as input. Our attention was also drawn to Circular No. 263/45/89-CX. 8, dated 7-8-1989 of the Central Board of Excise and Customs which clarifies that "Modvat credit would be admissible on the rejected products (input), if fresh products are made out of the same". He submitted that this clarification issued in the context of metal products which come to be melted on being rejected, should apply equally in respect of metal items which are strippe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upon their rejection, they become inputs in the manufacturing of new metal containers and once they are used as inputs, duty paid on them can be taken as Modvat credit. Therefore, we hold that the decision of the Tribunal in the Alcobax Metals Ltd. case constitutes the correct law on the subject. The decisions relied upon in the Revenue's appeal do not apply to the facts of this case. In the case of ICI India Ltd. it was held that the process of rectification of defective paints is not a process of manufacture. It is fundamental to modvat scheme that duty credit is available only if dutiable manufacture takes place. The same was the resoning in the case of Krishna Fabricators also. 7. In view of the discussions above we held that defectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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