Re-processing of returned goods as manufacture supports Modvat credit where duty is paid on clearance.

Re-processing of returned defective cold rolled coils and sheets was treated as manufacture under note (4) of Chapter 72 of the Central Excise Tariff, so unchanged product classification did not bar excise treatment. Because the reprocessed goods were cleared on payment of appropriate duty, Modvat credit was held admissible. The Tribunal also followed its earlier decision in the assessee's own case and saw no reason to depart from that view merely because a reference application against the earlier order was pending or allowed. The operative principle is that duty-paid clearance after manufacture-supporting re-processing sustains Modvat eligibility.

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Issues: Whether Modvat credit was admissible on defective cold rolled coils and sheets received back for re-processing and cleared on payment of duty, where the re-processing was alleged not to amount to manufacture.

Analysis: The Tribunal followed its earlier decision in the assessee's own case and held that the processes undertaken on the returned goods amounted to manufacture within the meaning of note (4) of Chapter 72 of the Central Excise Tariff. The fact that the product classification remained unchanged was held to be immaterial. Since the reprocessed goods were cleared on payment of appropriate duty, the assessee was held entitled to Modvat credit. The pendency or allowance of a reference application against the earlier order was held not to warrant departure from that view.

Conclusion: Modvat credit was held admissible, but the appeal challenging that allowance failed and was dismissed.

Final Conclusion: The Tribunal affirmed that re-processing of the returned goods constituted manufacture for central excise purposes, with the consequence that duty-paid clearance supported eligibility for Modvat credit.

Ratio Decidendi: Where re-processing of returned goods amounts to manufacture under the tariff entry, Modvat credit cannot be denied merely because the product classification remains unchanged, provided the goods are cleared on payment of duty.

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