Intermediate product treatment preserved Modvat credit for inputs used to make captively consumed gravure printing cylinders.

Captively used gravure printing cylinders were treated as intermediate products in the manufacture of printed laminated plastic film, even though they could be final products for another purpose. The Tribunal applied the Larger Bench view that such intermediate products are governed by Rule 57D(2), so Modvat credit on inputs used in their manufacture remains admissible despite exemption on clearance; Rule 57C did not bar the credit. Earlier decisions excluding sand moulds from the intermediate product category were held no longer good law, and the credit claim was upheld.

---

---

Issues: Whether gravure printing cylinders captively used in the manufacture of printed laminated plastic film were intermediate products so that Modvat credit on inputs used in their manufacture remained admissible despite exemption under Notification No. 67/91 and the applicability of Rule 57C.

Analysis: The Tribunal held that a product may be the final product for one purpose and an intermediate product for another. As the cylinders were captively consumed in the process of manufacture of printed laminated plastic film, they were intermediate products within the manufacturing chain. The Tribunal followed the Larger Bench view that intermediate products are to be considered with reference to Rule 57D(2), and not under Rule 57C alone, where inputs used in their manufacture remain creditable even if the intermediate product is exempt when cleared for sale. It also held that earlier decisions treating sand moulds as outside the intermediate product category were no longer good law.

Conclusion: Modvat credit on the inputs used in the manufacture of the gravure printing cylinders was admissible, and the appeals were rejected.

---