Jeet Ram Kait, Member (T)

1. All these three appeals arise against three Show Cause Notices. As the issue involved in all these three appeals is the same, the Commissioner (Appeals) has passed a common order.

2. The facts of the case, in brief, are that M/s. Snowcem India Ltd. are engaged in the manufacture of paints falling under Tariff Heading 3209.10 and resins falling under Tariff Heading 3905.90 of the Central Excise Tariff Act. They also have a factory at Mumbai wherein paint is manufactured. The resin manufactured at Madras is used for the manufacture of paints both at Madras and Bombay. They had availed Modvat credit of duty paid on the inputs used in the manufacture of resins cleared to Bombay in terms of Notification No. 217/86 after following Chapter X Procedure. Revenue wanted to deny them Modvat credit as it was found that the input credit pertaining to the resins cleared to Bombay under exemption Notification is liable to be reversed in terms of Rule 57C. It was, in this background the Assistant Commissioner confirmed short levies in respect of three Show Cause Notices amounting to Rs. 3,94,0859/-, Rs. 4,47,254/- and Rs. 2,23,295/-. The appellants had taken the plea that the provisions of Rule 57C will not be applicable to the facts of the instant case inasmuch as only the intermediate product is removed without payment of duty and the final product i.e. paints is subjected to duty both at Madras and Bombay. Ld. Commissioner (Appeals) has held that the resins are intermediate product when consumed in the manufacture of paints at the Madras factory, but when they are cleared to Bombay for being used in the manufacture of paints, it becomes a final product in the context of Modvat scheme. He therefore held that the Resins cleared in terms of the Notification No. 217/86 would come under the mischief of the provisions of Rule 57C, and therefore, directed the appellants to reverse the Modvat credit availed in respect of such resins. Aggrieved by this order, the appellants have come in appeal before us.

2. Appearing on behalf of the appellants Shri J. Narayanaswamy, ld. Counsel submits that this is not a case of exemption of the final product because the final products are subjected to duty both at Madras and Mumbai, and therefore the provisions of Rule 57C are not applicable. He further submits that they are not final products but they are only intermediate product which came into manufacture of final products and have been sent to their Bombay factory under Chapter X Procedure. He, therefore, submitted that there is no question of reversal of the Modvat credit because of the fact that the final products are dutiable and are not exempted for invoking Rule 57C. He invited our attention to the decision rendered by the Tribunal in the case of Escorts Limited v. CCE, New Delhi reported in 1999 (107) E.L.T. 245 (T) wherein it has been held that transfer of input to other units of assessee under Chapter X Procedure Modvat credit cannot be denied. He also drew our attention to the decision rendered by the NRB in the case of Dujodwala Resins Terpenes Ltd. v. CCE, Chandigarh reported in 1997 (93) E.L.T. 451 (T) wherein also it was held that inputs used in manufacture of final product cleared by appellant under Chapter X Procedure in terms of Notification No. 191/87-C.E., dated 4-8-1987 wherein it was held that the provision of Rule 57C would be applicable. Modvat credit would not be available if the final products are exempted. Whereas in their case the final products are dutiable, duty being paid on the final products both on the Madras factory and Mumbai factory. He also invited out attention to the judgment rendered in the case of CCE, New Delhi v. Hindustan Sanitarywares & Industries reported in 2002 (145) E.L.T. 3 (S.C.) wherein it was held that Modvat credit is available on captively consumed inputs even if intermediate products are exempted from payment of duty since the final products are dutiable. It was the case where plaster of paris was used in making moulds which are in turn used as inputs in relation to the manufacture of sanitaryware (final product) in terms of the exemption Notification No. 217/86-C.E. as amended which is a notification in support of the goods which are being captively consumed within their factory. He therefore submits that in view of the above referred decisions and judgment, the appellants are not required to reverse the Modvat credit so availed by them.

3. Heard Shri A. Jayachandran, ld. DR for the Revenue who reiterated the finding recorded by the Commissioner (Appeals).

4. We have considered the submissions made by both the sides and we do not find any merit inasmuch as the intermediate product have gone into the manufacture of the final product namely Paints at their factory at Bombay and such intermediate product cannot be called as final product because the final product is the Paints. The ratio of the above judgments is fully applicable to their case and whether the inputs are sent under Chapter X Procedure or intermediate product are sent under Chapter X Procedure but they are being used in the manufacture of final product on which duty is discharged, Modvat credit cannot be denied to the appellants. Therefore, we set aside the impugned order passed by the Commissioner (Appeals) and allow all the three appeals.