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TMI Blog2000 (12) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... n the manufacture of another excisable commodity. The department noted that, despite this exemption, the appellant paid duty on the PVC sheet or film. It also took Modvat credit of the duty paid of the resin and other inputs used in the manufacture of the PVC film or sheet. The appellant also utilised the credit of the duty paid on the PVC film and sheet for payment of duty on the leather cloth in the manufacture of which it used this product. 2.The department therefore issued notice dated 28-1-1993 to the appellant. The notice alleged that credit was wrongly taken on the PVC film or sheet, since it was exempt from duty by notification, and the manufacturer had no option to pay duty on an exempted product. The notice invoked Rule 57-I, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 177/86. The Commissioner declined to follow the decisions of the Tribunal cited before him, holding that the judgment of the Andhra Pradesh High Court in Ganesh Metal Processing Industries v. Union of India - 1996 (81) E.L.T. 11 took a contrary view. He also found that the Tribunal decisions related to notifications which provided partial exemption from duty, and would not apply to complete exemption contained in Notification 217/86. He emphasised that the Notification 217/86 was introduced in furtherance of the Modvat scheme. He therefore confirmed the proposal for recovery of Modvat credit and also demanded interest. 4.The argument of the appellant before us is the same as was raised before the Commissioner, that the decisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1995 (80) E.L.T. 91. 8.It therefore follows that the appellant was entitled to pay duty on the PVC film or sheet, notwithstanding that it was exempted by notification 217/86. What is the consequence of the payment of such duty? In the normal course, the duty so paid could be available for manufacturer as credit to be utilised for payment of duty on the product manufactured out of this product. The position that we are concerned with is different, however. The appellant's final product was leather cloth, the textile fabric coated with the PVC. It converted the PVC granules into sheet or film only, or at any rate predominantly, for use in the manufacture of the coated fabrics. There is no material in the appeal, nor was it contended befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the method adopted by the appellant of breaking up of the manufacturing process into two, first for the manufacture of sheets, and thereafter the coated fabrics out of the sheet would result in a situation where the provisions of the Notification 177/86 restricting the credit would be rendered nugatory. Those provisions would not apply at all. The provisions of the law relating to payment of duty on exempted goods, as interpreted by the Tribunal in Everest Converts v. CCE and other decisions, have to be construed so as to be in harmony with the law limiting Modvat credit, contained in Notification 177/86. 10.In conclusion, it will have to be held that the act of the appellant in paying duty on the sheets, which are exempted by Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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