ORDER
Gowri Shankar, Member (Technical)
1. The application is for waiver of deposit of Rs. 1.90 crores. The applicant imported major components of paint shop. Since these components when put together conferred upon it the essential characteristics of a paint shop, they were assessed by applying Note 2(a) of General Interpretative Rules to the Customs Tariff as a complete paint shop under heading 54.42 of the Tariff. Applicant brought these components into its factory on various dates, but all prior to 1.3.99. The components were assembled into a paint shop after this date. The question for consideration in this appeal is the entitlement to modvat credit of the additional duty of customs paid on these goods. The Commissioner (Appeals) has, in the impugned order, confirmed the view of the Deputy Commissioner that credit could not be taken under rule 57Q for the reason that on the date of their receipt of the goods classifiable under heading 87.24 were not specified in rule 57Q as capital goods.
2. The emphasise placed by the counsel for the applicant is upon an argument which was raised as an alternative. The alternative has not been raised earlier and it is contained in an application of additional grounds. That application is allowed.
3. The contention is that by application of Note 6 to Section XVI of the Central Excise Tariff the assembly of the components into a paint shop amounted to manufacture. Therefore credit would be available under rule 57A of the duty paid on each part of the paint shop.
4. The departmental representative opposes this contention on the ground that for legal purposes whatever imported and brought into the factory is a complete paint shop. He also emphasised that this ground is being raised for the first time.
5. The ground raised involves a question of law and can be raised at any stage. Prima facie we see a conflict between the provisions of note 6 to Section XVI and provisions of General Interpreted Rules. If, for purposes of law, what the applicant imported is a complete paint shop, can it then be said that it manufactured another paint shop out of this paint shop? When confronted with the same question however the Board and the Tribunal have found it possible to answer such a question in the affirmative. In its circular 374/7/98 CX dated 21.1.98 the Board had said that since the assembly of components of a car into a car amounts to manufacture according to note 6 to section XVII of the Tariff each of these components kits are inputs and credit is available, evidently under rule 57A. This is the same view taken by the Tribunal in Majestic Auto Ltd. vs. CCE 2001 (42) RLT 149 holding that assembly of motor cycle out of parts of such motor cycle which were assessed to duty by application of the interpreted rules as motor cycle amounts to manufacture of motor cycle. If, the process amounts to manufacture for purposes of duty, it is reasonable prima facie, to conclude that it will also amount to manufacture for purpose of credit of duty paid on components. This effect is what the Board’s circular says.
6. It is contended that the department had adjusted out of the refund to the applicant Rs. 29.24 lakhs. If this is so, we do not think that any further deposit is required, particularly since having regard to the significant repetitive nature of the issue and the amount of credit involved, the appeal itself being listed on the request of the applicant for hearing on 8.8.2001. Accordingly, we waive deposit of the duty demanded and stay its recovery.