Assembly of imported components may amount to manufacture, supporting prima facie Modvat credit on duty-paid inputs.

Assembly of imported components into a paint shop may amount to manufacture under Note 6 to Section XVI, even where the goods were assessed as a complete paint shop under customs tariff interpretative rules. On that basis, the imported component parts can qualify as inputs, supporting prima facie eligibility to Modvat credit under Rule 57A on the duty paid components. The objection that the alternative ground was raised for the first time was not accepted, because it involved a question of law. The applicant was therefore found to have a prima facie case for interim relief.

---

---

Issues: Whether, for purposes of interim relief, the assembly of imported components into a paint shop amounted to manufacture so as to give rise to prima facie eligibility to Modvat credit under Rule 57A, despite the goods having been assessed as a complete paint shop under the tariff interpretative rules.

Analysis: The components had been imported and brought into the factory before 1-3-1999 and were assessed as a complete paint shop by applying the interpretative rule to the Customs Tariff. A prima facie conflict was noticed between that assessment and Note 6 to Section XVI of the Central Excise Tariff, under which assembly of components into a machine or system may amount to manufacture. Reliance was placed on the Board's circular and Tribunal precedent taking the view that where assembly amounts to manufacture, the component parts are inputs and credit is available. The objection that the alternative ground was raised for the first time was not accepted, since it raised a question of law.

Conclusion: The applicant was held to have a prima facie case for Modvat credit under Rule 57A on the duty paid on the components.

---