Intermediate product treatment under Modvat scheme allowed carbon electrodes to be sent for job work without duty demand.

Carbon electrodes used in battery manufacture were treated as an intermediate product rather than a final product for all purposes, so their clearance to job workers under Rule 57F(4) of the Central Excise Rules, 1944 was permissible. The Tribunal applied the Modvat principle against cascading duty and noted that a product may be a final product in one manufacturing line yet remain an intermediate product in another. Because the electrodes underwent further processing and were moved and accounted for under the prescribed procedure, the demand treating them as dutiable final products was not sustainable.

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Issues: Whether carbon electrodes, being an intermediate product in the manufacture of batteries, could be cleared to job workers under Rule 57F(4) of the Central Excise Rules, 1944 and whether duty could be demanded on the ground that they were a final product in themselves.

Analysis: The carbon electrodes were treated as an intermediate stage in the manufacture of batteries, and the Tribunal found that the Modvat scheme was intended to prevent cascading of duty at successive stages of manufacture. Relying on earlier decisions, it held that even where a product is a final product for one line of manufacture, it may still be an intermediate product for another. The fact that the electrodes underwent further processing before being used in the final product supported their treatment as goods eligible for removal to job work under Rule 57F(4). The Tribunal also accepted that the movement and accounting were under the prescribed procedure and that the Department's objection was hyper-technical in the light of the statutory scheme.

Conclusion: The benefit of Rule 57F(4) was available, and the demand on carbon electrodes cleared for job work was not sustainable.

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