TaxTMI 
TaxTMI 
2016 (7) TMI 801
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....cility of MODVAT Credit of duty paid on inputs & capital goods. They availed credit on steel plates & sheets as inputs. It was alleged by department that respondents wrongly availed MODVAT Credit by diverting the steel items for non-manufacturing operations like fabrication, maintenance of structures, etc., and in manufacture of goods exempted from duty. 3. A show cause notice was issued and after due process of law the demand in show cause notice was confirmed vide Order-in-Original dated 28.10.1999. The respondent herein filed appeal before the CESTAT, Bangalore. The Tribunal in Appeal No. E/ 150/2000 considered the issue of MODVAT Credit on steel plates & sheet pertaining to Rs. 40,79,054/- only. As per order dated 06.02.2004 the Tribun....
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....or repairs or maintenance of machinery installed in the plant. Therefore, steel pipes though chargeable to duty, the respondents did not discharge their duty liability on such goods manufactured by them. Again, in terms of erstwhile Rule 57C ibid, credit is not to be allowed, if final products are exempt. That therefore respondents are not eligible to take MODVAT Credit on steel plates and sheets even considering them as inputs as directed by CESTAT order, as they were used to manufacture pipes on which no duty was paid. 7. At this juncture, it would be worthwhile to have a look at the relevant discussion in the remand order passed by CESTAT. "In view of the submissions made by both sides, we are of the view that the adjudicating author....
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....n in this Notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise leviable thereon or is chargeable to nil rate of duty. " 11. Again, Rule 57D clause (2) reads as under: "Credit of specified duty allowed in respect of any inputs should not be denied or varied on the ground that any intermediate product have come in to existence during the course of manufacture of the final product and that such intermediate products or such inputs are used in the manufacture of capital goods as defined in rule 57D and that such intermediate products or capital goods, as the case may be are for the time being, exempt from the whole of the duty of exc....
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....to chemicals but also to other industrial and consumer goods. When the Department states that resins etc. i.e. the inputs, which are for consideration before us, have been utilized in the manufacture of sand moulds and not in relation to the manufacture of iron/steel castings, the Department is giving a narrow meaning to the expression, 'intermediate goods'. The Department appears to be considering the single process of manufacture of goods. It forgets that there may be products, as in this case, that several preliminary processes of various goods are undertaken and those processes further converge into another process to make the final product, which is the aim of the manufacturing unit. All the products which are coming at a....
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.... products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. It is pertinent to note that the products in relation to which inputs have been described both under Rule 57C and 57D (2) as final products and the final product in the case of the appellants is package tea which is an excisable commodity and which comes into existence only after tea is put in the paper bags. The formation of paper bags therefore has to be taken as a process for bringing into existence the final product which is the package tea in the present case. The formation of paper bags in other....