2000 (6) TMI 46

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....ed is whether they are entitled to Modvat credit of the duty they originally paid on the defective metal containers. The issue has been referred to this Larger Bench on account of differing views expressed in the decisions of the Tribunal. 2. The ld. Commissioner (Appeals) took the view that the decision of the Tribunal in Alcobex Metals Ltd. v. CCE - 1993 (68) E.L.T. 146 applied to the case of the respondents and that Modvat credit was admissible. As against this, the Commissioner, CCE Meerut has submitted that the assessee is not entitled to Modvat credit in view of the decisions of the Tribunal in the case of I.C.I. v. CCE, Calcutta - 1997 (89) E.L.T. 216 and CCE, Bangalore v. Krishna Fabricators Pvt. Ltd. - 1996 (84) E.L.T. 304. The ....

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....ls) held in the impugned order that the assessees are re-manufacturing goods by the same processes as original process, from the rejected goods. The process is not removing of defects. In view if this factual position the Commissioner held that the case covered by Tribunal's decision in Alcobax Metal Ltd. case. 4. In the Alcobax Metal case, the assessees were manufacturers of Copper Alloy products like bars/rods, sections, wires, pipes and tubes etc. In certain cases purchasers returned goods to the manufacturer on the ground that they were defective. On receipt of the goods, they were used by them in the manufacture of fresh products by remelting the same in the factory. Modvat credit had been taken on the returned goods treating them a....

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....be an activity of manufacture of the parts retrieved and therefore credit would not be available on the rejected seat kushy. 5. During the hearing ld. Counsel representing the respondents submitted that under Rule 57A all goods used in the manufacture of final products are elgible for Modvat credit. There is no restriction that if duty had been paid on a final product the same cannot be treated as input. Our attention was also drawn to Circular No. 263/45/89-CX. 8, dated 7-8-1989 of the Central Board of Excise and Customs which clarifies that "Modvat credit would be admissible on the rejected products (input), if fresh products are made out of the same". He submitted that this clarification issued in the context of metal products which c....