V.P. Gulati, Member (T)

1. This appeal has been filed by the Revenue against the order of the Collector of Central Excise (Appeals), Madras, dated 24-10-1989.

2. The short point that falls for consideration in the appeal is whether the credit on the inputs under Rule 57A going into that portion of the specified finished product, which is cleared under exemption notification, has to be reversed. The respondents are manufacturers of tyres and, after filing a declaration under Rule 57G, they took MOD VAT credit in respect of the inputs specified under Rule 57A. After the finished product had been manufactured, the respondents cleared part of the goods free of duty under a notification.

3. The learned SDR for the Department pleaded that the MODVAT Scheme was introduced with the object of avoiding cascading effect of duty and under Rule 57C it has been specifically provided that credit of duty is not to be allowed if final products are exempt. The said Rule for convenience of reference is reproduced below:

RULE 57C. Credit of duty not to be allowed if final, products are exempt. - No credit of the specified duty paid on the inputs used in the manufacture of a final product shall be all