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