Judgment:
1. The issue in the appeal relates to availability of Modvat Credit in respect of duty on the following items: 2. Shri S. Arulsamy, the learned DR for the department while reiterating the grounds of appeal has pleaded that the lower authority has not taken note of the fact that certain inputs in respect of which Modvat Credit was denied by the original authority had not been declared by the respondents. The lower authority in the impugned order, has merely stated that mention of wrong sub-heading would not disentitle the assessee to the benefit of Modvat Credit.
3. Shri T. Ramesh, learned Counsel for the respondent while conceding that in case of items which have not been declared, Modvat Credit would not be available, has stated that this position is required to be verified with reference to the items as set out in the grounds of appeal. He therefore, prayed for remand of the matter.
5. We observe that in the case of items which are not declared, as fairly conceded by the learned Counsel for the respondents Modvat Credit would not be available. However, the position will be required to be verified in respect of the items in question with reference to the declaration which was filed at the relevant time. The learned DR pointed out that he has got copy of the same. However, he has no information whether there is any other declaration filed by the assessee at the relevant time. In view of this, the matter will be required to be examined by the original authority for allowing the benefit of Modvat Credit, in the light of the above.
6. In regard to amonia paper, the learned DR pointed out that this was required for preparation of drawings etc. and it was at a stage anterior to the manufacturing process of notified finished product and the use of the same cannot be taken to be in or in relation to the manufacture of notified finished product.
7. The learned Counsel for the respondents pleaded that without the drawings, the manufacturing process of the appellant could not be carried out and therefore, the amonia paper for preparation of drawing should be taken to be in or in relation to the manufacture of the finished product.
8. We observe that the benefit of Modvat Credit is available only in respect of those items which are used and which can be shown to be used in or in relation to the manufacture of the notified finished product.
In this connection we have to examine the process of manufacture which gives rise to manufacture of the notified finished product. There can be processes preparatory to the manufacture such as preparation of the raw materials etc. for use in the manufacturing stream and inputs used in such process have been held to be eligible for the benefit of Modvat Credit. The question is whether amonia paper used for drawing can be one such preparatory process. We observe that preparation of drawing is basically a R & D exercise as this drawing facilitate the manufacturing process i.e manufacture of the specified goods according to the specifications given in the drawings for the mould etc. Preparation of drawing cannot be taken to be integrally connected with such manufacturing process. The Hon'ble Supreme Court in their latest decision in the case of Indian Farmers Fertilizers Coop. Limited v.C.C.E., Ahmedabad reported in 1996 (86) E.L.T. 177 has held that amonia used for treatment of effluent will be eligible for the benefit exemption inasmuch as there is integrality of operations as the process of manufacture is related to the material used. Preparation of drawing cannot be considered as a process integrally connected with the manufacturing stream of the notified finished product and therefore, the benefit of Modvat Credit in respect of amonia paper could not be allowed. We, therefore, hold that the lower authority was in error in having allowed the benefit of Modvat Credit in respect of amonia paper.
9. In regard to tools, we find that the description of the goods is not set out in the grounds of appeal nor in the annexure attached to the show cause notice. In the paper book filed before us also, no details are set out in this regard. The lower authority has also not entered any finding in regard to the same. We, therefore, have no option but to remand the matter to the original authority for de novo consideration and entering a finding as to whether the tools are in the nature which fall within the excluded category after taking note of the nature of the tools, for the purpose of availing the benefit. The appeal is therefore, remanded in the above terms for de novo decision after affording opportunity of hearing to the respondent.