TaxTMI 
TaxTMI 
2004 (8) TMI 106
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....ufacture of parts. Those parts were then cleared to another factory of the Appellants, without payment of duty, by virtue of Notification No. 217/86-C.E., dated 2nd April, 1986. The parts were then used to manufacture tractors on which duty was paid. 3. The Respondent issued a show cause notice on the ground that Modvat credit was not admissible as the final goods, i.e. the parts were cleared without payment of duty. The Appellants claimed that the final products were not the parts but the tractors. The Appellants claimed that duty was being paid on the tractor and, therefore, Modvat credit was available under Notification No. 217/86-C.E., dated 2nd April, 1986. 4. The explanation given by the Appellants was not accepted. The Appellan....
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....itions and restrictions that may be specified in the notification : Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted. Explanation. - For the purposes of this rule, "inputs" includes - (a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products, (b) paints and packaging materials, and (c) inputs used as fuel, but does not include - ............................................................................................................................ ............
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....o nil rate of duty : Provided that such intermediate products are - (a) used within the factory of production in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export-Oriented Unit) on which the duty of excise is leviable whether in whole or in part; and (b) specified as inputs or as final product under a notification issued under rule 57A." The relevant portion of the Notification No. 217/86-C.E., dated 2nd April, 1986 reads as follows : "Inputs : Captive consumption exempt. 217/86-C.E., dt. 2-4-1986, as amended by 12/87-C.E., dt. 23-1-1987 (w.e.f. 10-2-1987), 82/87-C.E., dt. 1-3-1....
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.... (2) (3) 1. Goods classifiable under any headings of chapters 2, 3, 4, 5, 7, 8, 9, 11, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 25, 26, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 59, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95 or 96 [other than those falling under Heading Nos. 36.05 or 37.06 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) Goods classifiable under any headings of chapters 2, 3, 4, 5, 7, 8, 9, 11, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 25, 26, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 54, 55, 59, 64, 65, 66, 67, 68, 69,....
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....ole purpose of the Notification and the Rules is to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts....