MODVAT credit on printing stage allowed where duty was demanded treating printing as part of manufacture.

MODVAT credit was found admissible on the printing stage of processed fabrics because the Department had itself treated bleaching, dyeing and printing as separate stages of manufacture while demanding duty. The reasoning that credit could be denied for printing on the ground that no further process followed was inconsistent with the basis of the duty notice. Once printing was treated as part of the manufacturing chain for levy purposes, the Department could not adopt a contrary position to refuse credit for that same stage. The credit was therefore allowed to the assessee.

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Issues: Whether MODVAT credit was admissible on the printing stage of processed fabrics when duty was demanded treating bleaching, dyeing and printing as separate stages of manufacture.

Analysis: The demand itself proceeded on the basis that bleaching, dyeing and printing each constituted a stage of manufacture and duty was sought at each such stage. In remand proceedings, credit was allowed for bleaching and dyeing but denied for printing on the ground that no further process followed printing. That reasoning was inconsistent with the foundation of the demand notice, because the printing stage had also been treated as part of the manufacturing chain for levy purposes. Once the Department adopted that position for demanding duty, it could not deny credit on the contrary footing that printing was not a manufacturing stage.

Conclusion: MODVAT credit of Rs. 34,84,249/- was held admissible to the assessee.

Ratio Decidendi: Where duty is demanded on the footing that a process forms part of manufacture, credit cannot be denied for that same process by taking a contrary stand that it is not a manufacturing stage.

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