TaxTMI 
TaxTMI 
1993 (3) TMI 243
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....inputs. They had in their modvat declaration claimed modvat benefit in respect of Bench Rejections by describing it as one of the inputs used in the manufacture of final product. However, the modvat benefit was sought to be disallowed in respect of this input on the ground that the said inputs are manufactured by the appellants themselves as forged products and cleared to the customers and hence they cannot be treated as inputs. They are only defective final products cleared by the respondents and returned to the customers. Hence, they cannot be construed as inputs. It was also the case of the Department that these bench rejections are not occurring in the process of forging by the respondents in the factory. In this view, modvat benefit in....
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....l objection taken by the Asstt. Collector to the effect that there is no declaration for these inputs is not tenable because the copy of the modvat declaration made available in the file shows `bench rejection' and `process rejection' as inputs. However, a contention was raised by Shri Jain that such Bench rejection would only include reject materials in the case of manufacture of forging by the respondents and not in respect of the goods which have been cleared as final product to the customers, by whom they were found to be defective and the declaration would cover only such process and Bench rejections occurring in the factory of the respondents. This objection does not appeal to me mainly because of the fact that modvat declaration is r....
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....als) for the reasons extracted as below : "Under Rule 57A of the Central Excise Rules, 1944 inputs are permitted to be brought in under the Modvat Scheme for use in or in relation to the manufacture of the final product. This necessarily involves in utilization of the material brought into the factory, either in the manufacture of the final product or in relation to the manufacture of the final product. In this case, the test to be applied is whether the rejected paints and varnishes have been so used. Though for the word "manufacture", no comprehensive definition has been given in the Act, the word "manufacture" has been interpreted by the `Hon'ble Supreme Court in various pronouncements to the effect that only process cannot be a manuf....
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....n or in relation to the manufacture of the final product and not in the case of rejected materials brought for the purpose of re-processing or re-conditioning, it will be difficult to accept the proposition that Modvat Scheme could be utilised for such purpose. We also considered the observations of the Collector (Appeals), citing the Board's circular. Though any such circular does not have a legally binding force, we looked into that. This circular is particularly with reference to metal products, where, on account of damage, the goods may have to be scrapped and melted and then manufactured into new product. The test therefore to be applied is whether there is any manufacture involved in utilisation of the material brought in under the....