ORDER
G.R. Sharma, Member (T)
1. The appellant have filed this appeal against denial of Modvat credit and confirmation of the demand and imposition of penalty under Section 11 AC and under Rule 173Q.
2. The facts of the case in brief are that the appellants are engaged in the manufacture of PVC coated fabrics. They purchased yarn from the market took credit on this yarn and sent it to the job worker for conversion into gray fabrics. The Department alleged that the assessee did not follow the procedure under Rule 57J by following Notification No. 214/86. They alleged that since the appellant did not follow the procedure set out for this type of transaction under Notification No. 214/86, therefore Modvat credit was not admissible to them.
3. Arguing the appeal Shri K.K. Anand, Ld. Counsel submits that appellants had followed the procedure set out under Rule 57F(3) and 57F(4) and that this procedure was more or less the same as prescribed for the purpose under Notification No. 214/86. He submits that similar issue came up before the Tribunal in the case of Northern India Leather Works and Ors. v. Collector of Central Excise, New Delhi and Tribunal in its decision vide Final Order No. A/1155-56/99-NB dated 17.11.99 held that “thus we hold that the applicant had correctly taken Modvat credit on the yarn received as basic raw material because conversion into fabrics or dyeing of the fabrics was intermediate process and the product was intermediate product and there is a specific clause under Rule 57D wherein it has been specifically laid down that the Modvat credit taken on the inputs cannot be denied or varied in case the intermediate product happens to be exempted. The fact remains that the duty paid yarn was received as inputs either directly by the job workers or by the appellants and that the conversion into the fabrics was an intermediate product and the final product was coated fabrics which was dutiable. Therefore, Modvat credit was correctly admissible to the appellants.” The facts of the present case are identical to those considered by the Tribunal in the aforesaid judgment. We do not see any reason to disagree with that judgment. Following the ratio of the judgment, we hold that Modvat credit is admissible. In the result, the penalties imposed under Section 11AC and under Rule 173Q are also set aside. The appeal is thus allowed with consequential relief in accordance with the law.
