ORDER

V.P. Gulati, Member (T)

1. This appeal is against the order of Collector of Central Excise (Appeals), Madras. Brief facts are that the appellants availed of MODVAT Credit in respect of plastic raw materials and availed of permission granted under Rule 57F(2) for removal of the same for manufacture, through another manufacturer, of the intermediate product which was in the nature of components intended for manufacture of the specified end product. They have also filed declaration under Rule 57A declaring plastic raw material as one of the inputs. The other manufacturer viz M/s Perival Plastics Pvt. Ltd., Bangalore, who are the job worker, however, cleared the goods on payment of duty and sent back the same to the appellants and the appellants took MODVAT Credit in respect of the duty paid on the components. The learned lower authority had denied the benefit of MODVAT credit in respect of the input which was removed for the manufacturer of components for the reason that they had not complied with the requirements of Rule 57F(2). The learned Collector (Appeals) has also taken note of the provisions of Notification 214/86 and has stated that apart from the benefit under Rule 57F(2) which has been denied by the lower authority, the appellants are also not eligible for the benefit of Notification 214/86, inasmuch as on their own admission they have not complied with the conditions of the said Notification.

2. The learned Consultant for the appellants has pleaded that permission for removal of the goods under Rule 57F (2) has been granted and it does not matter in case the job worker had paid the duty on the intermediate product, for the purpose of Rule 57F(2), so long as the goods are returned to the appellants factory. He has pleaded that all the requirements under Rule 57F(2) have been complied with and in case the job worker had paid the duty credit of the same was taken by the appellants when the intermediate products had been received in the appellants' factory and the Revenue has not lost anything and the credit of the inputs originally taken will continue to be available to them.

3. Shri P. Sundararaju, the learned SDR for the Revenue pleaded that the manufacturer is required to follow provisions of Rule 57F(2) into and in the present case since the intermediate products were cleared from the factory of the job worker on payment of duty, the procedure under Rule 57F(2) cannot be taken to have been followed. According to him the intermediate product from the job worker's factory should have been brought back to the appellants' factory without payment of duty.

4. The point that arises for determination is whether the appellants can be taken to have complied with the requirement of Rule 57F(2) and are eligible for MODVAT credit on the inputs which were removed from the factory and out of which some intermediate goods were manufactured by the job workers who cleared the same on payment of duty. For the purpose of convenience the relevant portion of Rule 57F(2) is reproduced below:

"Notwithstanding anything contained in sub-rule (1) a manufacturer, may with the permission of the Collector of Central Excise and subject to such terms and conditions and limitations as he may impose, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside the factory -

(a) for the purpose of test, repairs, refining, reconditioning or carrying out any other operations necessary for the manufacture of the final products and return the same to his factory for further use in the manufacture of final products provided that the waste, if any arising in the course of such operations is also returned to the said factory; or

(b) for the purpose of manufacture of intermediate products necessary for the manufacture of the final products and return the said intermediate products to his factory, for further use in the manufacture of the final products, provided that the waste if any arising in the course of manufacture of such intermediate products is also returned to the said factory.

Provided that the said waste need not be returned to the said factory if the appropriate duty of excise leviable thereon has been paid."

5. It is seen from the rules that what is envisaged under Rule 57F(2) is that a manufacturer can remove the inputs in respect of which MODVAT Credit has been taken for the purpose of test, repair etc. or for manufacture of the intermediate product and on the condition that he returns such processed inputs or intermediate goods to the factory, for further use in the manufacture of the final products. He is also allowed to remove such inputs subject to prior permission of the Collector from the factory for home consumption or for export on payment of appropriate duty of excise as if such inputs have been manufactured in the said factory. Thus removal of the inputs on which MODVAT Credit had been taken can also be made for purpose other than repair, refining or reconditioning and manufacture of intermediate goods etc. for home consumption also on payment of appropriate duty. The former category of removal i.e. for manufacture of intermediate goods etc. is thus not treated as clearances for home consumption. The appellants claim that clearances have been made in terms of Rule 57F(2) and pleaded that they have complied with the requirement of Rule 57F(2). The appellants in the present case had been given permission under Rule 57F(2) and got the intermediate product manufactured out of the input removed at the job workers premises and the intermediate goods were brought back to the factory after payment of duty at the job workers premises. There is no dispute that in case duty had not been paid at the job workers premises there would have been no dispute as to the eligibility of the appellants to the benefit of Rule 57F(2). The plea of the Revenue is that the goods after payment of duty at the job workers premises cease to come within the preview of Rule 57F(2) and the inputs cannot be taken to have been cleared in terms of Rule 57F(2). The plea is that Rule 57F(2) does not envisage clearance of the goods which are processed or manufactured out of the inputs on payment of duty from the premises of the job worker. It is pertinent to note in this context that while the Rule permits removal of the inputs in respect of which MODVAT Credit had been taken under Rule 57F(2) without payment of duty, it does not specifically mention that what should be the manner of clearance of the goods manufactured therefrom, at the job workers premises for return to the premises of the manufacturer availing of MODVAT Credit. Under Section 3 of the Central Excises & Salt Act, 1944 duty is required to be paid on the goods which are produced or manufactured unless otherwise exempted under the tariff or under a Notification issued under the Central Excise Act or Rule or unless removal without payment of duty is provided for under any other provisions of the Act or Rules. Under the MODVAT Scheme and the Rules framed thereunder, there is no specific provision for any intermediate product manufactured in terms of the permission granted under Rule 57F(2) to be cleared without payment of duty. However, exemption has been granted under Notification 214/86 to the goods manufactured on job work basis and which are used in or in relation to the manufacture of the final product. But for this Notification, goods manufactured at the job workers premises would have had to pay duty. Now the question is where the job worker pays the duty, is there any provision in the rule, holding that the appellant will come out of the preview of Rule 57F(2). In our view, in case the job worker pays the duty, he takes the consequence of payment of duty and the normal procedure applicable for availing of MODVAT Credit in respect of the duty paid goods can be followed by the manufacturer of the final product. In the present case, the job worker has chosen to pay duty and after clearance of the same the appellants have taken the MODVAT Credit in respect of the duty paid by the job worker and the job worker has not taken credit in respect of the inputs received by him. In our view, the job worker cannot be forced to avail of the benefit of the Notification and the choice is with him in regard to availment of the benefit of Notification. So far as the appellants are concerned, they have gone through the necessary drill as prescribed under Rule 57F(2) in regard to sending the goods to the job worker and getting the same back from the job worker. Payment of duty on the intermediate goods at the hands of the job worker does not in any way make any difference in law so far as the facility provided under the Rule 57F(2) is concerned. As pointed out above, but for the issue of Notification 214/86 even under Rule 57F(2) the job worker would have been called upon to pay duty on the intermediate goods manufactured before return of the same under the Rules. As it is, in the present case, the Revenue cannot be said to have suffered any prejudice inasmuch as whatever duty was paid at the intermediate stage, the appellant took only that much credit on receipt of the duty paid intermediate goods and therefore, this transaction between the job worker and the appellants was Revenue neutral. The inputs as seen have been used in the process of the manufacture of the intermediate goods intended for the manufacture of the final products covered under the MODVAT Scheme. In this view of the matter, we hold that the appellants are eligible for the benefit of MODVAT Credit in respect of the goods and accordingly we allow the appeal.