Judgment

Bharucha, J.-It is convenient to set out, at the outset, the question involved in these appeals.

2. The manufacturer purchases raw material. He uses the raw material in the maunfacture of an intermediate product. He then uses the in­termediate product in the manufacture of a final product. The raw material and the intermediatae product are liable to excise duty and they are specified goods for the purposes of the Modvat scheme. The assessable value of the intermediate product for the purposes of excise duty has, it is agreed in the instant case, to be determined on the basis of its cost. In determining the assessable value of the intermediate product the cost of the raw material has to be taken into account. The question is : is part of the cost of the raw material the price paid byteh manufacturer to its seller, as contended by the Revenue, or is it the price of the raw material less the excise duty thereon, which has been paid by the seller and for which the manufac­turer is intitled to credit under the Modvat scheme, to be utilised against the payment of excise duty on products manufactured by him, including the intermediate product, as contended by the manufacturer.

3. Th