ORDER
V.P. Gulati, Member (J)
1. This appeal is filed by the Revenue against the order of the Collector of Central Excise (Appeals), Madras. The short point that falls for consideration is whether the inputs used for manufacture of Caustic Soda lye which are finally used for the manufacture of PVC resin and covered by exemption Notification are eligible for the benefit of MODVAT CREDIT. The original authority in this regard has held as under:
“Although the product viz. Caustic Soda Lye and Caustic Soda Flakes availed of exemption, this eventually is already covered under Rule 57D(2) of the Central Excise Rules, 1944. Therefore, so long as the conditions of MODVAT procedure of declaring inputs and final products are fulfilled a credit cannot be denied simply because at intermediary stage certain product emerges and no duty is paid on them on account of the same being exempted, for the time being from the whole of the excise duty leviable thereon provided that such intermediary products are used within the factory of production in the manufacture of final product on which the duty of excise is leviable whether in whole or in part. In the circumstances, I do not find that any irregularity has been committed as alleged in the show cause notice.”
2. The Collector (Appeals) on application filed by the Assistant Collector in terms of Section 35E(4) of the Central Excises & Salt Act, 1944 confirmed the order of the original authority and held as under:
“I have carefully examined the records and considered the respondents contentions. As for respondents’ contention that caustic soda lye and flakes are not their final products the same is correct. The word ‘final product’ used in Rule 57C of Central Excise Rules, 1944 has to be interpreted with_reference to the manufacturer and not the marketability of the product. In this case the above goods are not the final products of the respondents. As such, provisions of Rule 57D(2) are available to the respondents for caustic soda lye and flakes. The application to that extent is not acceptable.”
3. The learned Appellant-Collector has urged the following grounds of appeal and prayed for setting aside the order of the lower appellate authority:
“Collector (Appeals) is not correct in holding that the caustic sod lye and caustic soda flakes are intermediate products in terms of Rule 57D(2). Rule 57D(2) states that the credit of duty paid on inputs shall not be denied on the ground that any intermediate products come into existence during the course of manufacture of final products which are for the time being exempt from the whole of duty. Inputs such as Barium carbonate and soda ash are being used in or in relation to the manufacture of caustic soda lye and caustic soda flakes. The process of manufacture is complete at this stage and the end-products are only caustic soda lye and caustic soda flakes. They are not the intermediate products that come into existence in the course of manufacture of final product viz. PVC resin in terms of Rule 57D(2) of Central Excise Rules. As caustic soda lye which is cleared for use in the purification of brine solution is wholly exempt from payment of duty under Notification 9/69 and Caustic soda flakes/solid cleared for use in the manufacture of PVC resin are not charged to duty under Notification 217/86, MODVAT Credit is not available to the assessee in terms of Rule 57C.”
4. The learned SDR reiterated the grounds of appeal.
5. We observe that there is no doubt that the inputs received were used for manufacture of caustic soda lye and flakes which were ultimately used in the process for which by exemption notification no duty was payable in respect of the said two items. The lower authorities have held the two products are in the nature of intermediate products in terms of Rule 57C of the Central Excise Rules and the respondents are eligible for the benefit of input credit by reason of specific use. There is nothing to show that the caustic soda lye and flakes are not being manufactured as inprocess material by use of the inputs. The Revenue’s plea is that the caustic soda lye and flakes are in the nature of final products. We observe that as to what is intermediate or final product, the Scheme of MODVAT has to be read in the context of the manufacturing process of a particular assessee. So long as it can be shown that the inputs have been used for manufacture of any inprocess materials which are used in the manufacture of Final product, the said material manufactured out of the inputs before it is finally used in the manufacture of the declared final product will have to be treated as intermediate product. There is nothing on record to show nor is there any plea that caustic soda lye and casutic soda flakes which emerged during the manufacturing process by use of the inputs were not used as inprocess material for the manufacture of declared final product. In view of above, we hold that the lower appellate authority’s order is maintainable in law. We, therefore dismiss the appeal of the Revenue.
