Rule 57J - Minutes on Point No. 32 of the Modvat Meeting held at Bombay on 7-5-1990 - Regarding - Central Excise - 12/91-CX.8

Rule 57J - Minutes on Point No. 32 of the Modvat Meeting held at Bombay on 7-5-1990 - Regarding Circular No. 12/91-CX.8 Dated 28-2-1991 [From F. No. 263/3/91-CX.8] Government of India Central Board of Excise Customs New Delhi Subject : Rule 57J - Minutes on Point No. 32 of the Modvat Meeting held at Bombay on 7-5-1990 - Regarding. I am directed to refer to the minutes on point No. 32 of the Modvat meeting held at Coimbatore on 22-1-1991 regarding Rule 57J. Trade had represented therein that the facility available under Rules 57J to intermediate goods manufactured on job charge basis should be extended to even those intermediate products manufactured by other units of the same manufacturer. The matter has been examined by the Board. The basic aim of the Modvat Scheme is to avoid the cascading effect of duties on a product. Therefore, the scheme permits Modvat credit on all goods forming a part of the final product, though the final product may be manufactured in several stages, provided duty is paid at each stage of the manufacturing chain. Normally, the duty paid on an input used in an exempted intermediate product is not available as credit in a case where the intermediate product is brought from outside the factory of the manufacture. However, to ensure an unbroken chain of Modvat Rule 57J has been incorporated under the Modvat Scheme so as to extend credit of duty on certain inputs, even in respect of exempted intermediate products (notified under Notification No. 351/86-C.E., dated 20-6-1986) which are brought from outside. However one of the provisions of this notification requires that the intermediate products should be manufactured in a factory as a job work and exemption contained in Notification. No. 214/86-C.E., dated 25-3-1986 should have been availed in respect of them. Thus it may be observed that Rule 57J grants limited flexibility of job work. The rule merely requires that the unit availing this facility should be a job worker in terms of Notification No. 214/86-C.E. A manufacturing unit of the same manufacturer can also be a job worker. Therefore, so far as the aforesaid manufacturing unit is job worker, it would also be eligible for credit under Rule 57J. Board is of the view that since Rule 57J has limited flexibility, allowing general relaxation of Rule 57J to any other factory (irrespective of whether it is job worker or not) would amount to breaking of the Modvat chain, which would not be desirable. It has, therefore, been decided not to accede to the request. Trade field formations may be informed suitably. Receipt of this letter may please be acknowledged.