SPECIAL TOOLS Vs. CCE, MEERUT

JUDGEMENT

(1.) THE appellants in these two appeals are manufacturers of excisable goods covered by Chapter 84 and 87 of the Schedule to the Central Excise Tariff Act, 1985 and are availing the facility of modvat credit on inputs under Rule 57A of the Central Excise Rules 1944. During the relevant periods, they manufactured parts of car air -conditioners and cleared the same on payment of Central Excise Duty to certain manufacturers of car air conditioners. Some of the parts so supplied by the appellants were found to be defective and hence returned to them by the manufacturers of car air conditioners and, when this was done, the latter duly paid duty of excise on the defective goods removed from their factory to the appellants. The appellants, on their part, treated the defective parts as their inputs and used them for manufacture of defect -free parts, which were subsequently supplied on payment of duty of excise to the same customers. In doing so, the appellants took modvat credit on the aforesaid of Rs.1,04,974.70 during the period December, 1996 to March, 1997 and to the tune of Rs. 90,839.66 during the period April to June 1997. The department by show -cause notice, objected to such availment of credit, on the ground that the goods on which the credits were taken were not 'inputs' but final products namely, parts of car air conditioners. The party contested this objection. The jurisdictional Assistant Commissioner, who adjudicated the dispute, upheld the department's stand and disallowed the above modvat credits. The order of the Assistant Commissioner were, in turn, upheld by the Commissioner (Appeals) in the appels filed by the aggrieved assessees. Hence the present appeals before the Tribunal.

(2.) I have carefully examined the records and have heard both sides. Ld. Consultant sh. S.K. Gaur, representing the appellants, submits that the issue involved in these cases stands squarely coverd in favour of the assessees by decisions of the Tribunal Larger Bench. In this connection, he has cited the Larger Bench decisions in the following cases: -

(3.) LD . DJR, Sh. S.C Pushkarna, submits that both the decisions cited by ld. Consultant are distinguishable. He submits that any defective final products returned by customers to the manufacturers should be show to have been subjected to the process of manufacture in order that such goods qualify to be 'inputs' for the purpose of availment of modvat credit. In the instant case, Id. JDR submits, there is nothing to show that the defective car air conditioner parts returned by the appellant's customers were subjected to the same process of manufacture as the one which used to be conducted on original raw materials in their factory. Ld. JDR further seeks to draw support from another decision of the Tribunal's Larger Bench, which he has cited as Hindalco Industries Ltd. Vs. CCE, Allahabad [2000 (119) ELT 711). In that case, modvat credit was held to be admissible on defective final products which were treated as inputs in a process of manufacture involving re -melting and re -processing of the defective goods leading to emergency of fresh defect -free products. Ld. JDR submits that there is no material on record in the instant case to show that the returned defective air conditioner parts were, in fact subjected to re -manufacture yielding fresh defect -free parts. He finally submits that this aspect of the matter can be ascertained only at the end of adjudicating authority.