2007 (3) TMI 613

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....ey had not included the cost of dipping chemicals they had received free of cost from Goodyear. SRF had taken Modvat credit of duty paid on these chemicals. In the impugned order, Commissioner has confirmed the allegation that SRF had suppressed the fact of receipt of duty paid dipping chemicals free of cost, availment of the duty paid as credit and excluding the cost of chemicals from the value of dipped nylon tyre cord fabrics with intention to evade payment of duty; that the process of dipping of tyre cord fabrics in chemical solution amounted to manufacture of excisable goods; that the goods fell under Chapter sub-heading 59.02 of the CETA Schedule and that the differential duty was accordingly demandable in terms of proviso to Section ....

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....m 1-4-99. We consider the appeal as modified accordingly, and take up this issue for consideration. 4. The learned Counsel has cited the decision of the Apex Court in International Auto Ltd. v. C.C.E., 2005 (183) E.L.T. 239 (S.C.) wherein the Apex Court had observed that 'according to the Modvat scheme, it was the Modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product'. Manufacturer of the final product would be entitled not only to adjust credit on the inputs supplied by it to the intermediate purchaser under Rule 57F(2)(b), but also to the credit of duty paid by the intermediate purchaser, on the intermediate....

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....itted that in view of the decision of the Apex Court the appeal deserved to be allowed. 6. The learned SDR endeavored to distinguish the instant case on facts from the International Auto Ltd case on the ground that SRF had availed Modvat credit of free supply materials whereas in the International Auto Ltd. case they had not taken input duty credit in respect of the inputs they had received free of cost from Telco. She defended the impugned order. 7. We have carefully considered the case records and the submissions by both the sides. We find that though the facts of the case before us are slightly different as pointed out by the learned SDR, the ratio of the decision of the Apex Court in the International Auto Ltd. case is a....

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....chemicals on payment of duty and had taken credit. They had not included the cost of the dipping chemicals in the value of NDTCF cleared to Good year. The movement of the inputs was not under Rule 57F(4). The facts of the instant case are not identical to those of International Auto Ltd. to that extent. However even if SRF had paid duty on the correct value of the NDTCF, Goodyear could have availed credit of the same and it would have made no impact on the revenue that will accrue. Therefore, the impugned order is occasioned by the appellant's failure to follow a revenue neutral exercise. Operation of the Modvat scheme on the manufacturer of final product had rendered the valuation dispute of the intermediate product in question of no conse....