PACE MARKETING SPECIALITIES LTD. Vs. CCE

JUDGEMENT

(1.) In this appeal which has been filed by the appellants against the impugned order, the issue relates to the availability of modvat credit to the appellants on the adhesives which had been disallowed by the Commissioner (Appeals) through the impugned order after confirming the Order -in -Original of the Asstt. Commissioner who confirmed the duty demand of Rs. 8,945 with penalty of equal amount on the appellants by disallowing the modvat credit.

(2.) The facts are not much in dispute. The appellants are engaged in the manufacture of adhesives classifiable under sub -heading No. 3506 of the CETA. They are also availing the facility of modvat credit on the duty paid inputs. They availed credit of Rs. 8,945 on an invoice issued by M/s Vam Organics Ltd., a trader, who rejected and returned the adhesives to the appellants. They thereafter filed declaration for the so received adhesives as input under Rule 57 -G and availed the credit of duty paid on it treating it as their input, though initially, it was their final product. The Asstt. Commissioner disallowed the credit on the ground that under Rule 57 -A read with Notification No. 5/94 dated 1.3.1994, the modvat credit on the final product cannot be allowed. That order had been affirmed by the Commissioner (Appeals).

(3.) We have heard both sides and gone through the record. We find from that the record that the adhesives, initially sold by the appellants as final product, were returned to them after the same were rejected by the trader under proper invoice. When the appellants cleared these goods as final product to the trader, they had discharged the duty. When they received back the adhesives as rejected from the trader, the trader had issued the invoice -cum -challan in the name of the appellants. After the receipt of the defective goods, the appellants were not again clearing as such or after rectifying the defects. They were using as we find from the record as input for manufacturing adhesive of another quality known as PU2000 by blending with other ingredients. The new category of adhesive manufactured by them had been cleared on payment of duty. Having discharged the duty on the defective adhesives received from the trader and used the same as the input and not cleared as such after rectifying the defect, they are entitled to claim the modvat credit. The authorities below, in our view, had wrongly disallowed the same.