Judgment : Dr. S. L. Peeran (Oral), MEMBER (JUDICIAL) Revenue is aggrieved with Order-in-Appeal No.92/2005 CE dated 19. 2005 by which the Commissioner (A) has upheld the prayer of the assessee to avail cenvat credit in respect of inputs used in the manufacture of job work goods which are sent to their principal manufacturer under Notification No. 214/86 CE dated 23. 1986. The finding portion of the commissioner (A) is reproduced herein below. Findings: I have gone through the case records, written submission made in the grounds of appeal and also the oral submission made at the time of personal hearing. The issue to be decided in this matter is whether the goods manufactured on job work basis by the appellant, under Notification No.214/86 CE dated 25.03.1986, are exempted goods for the purpose of Rule 6 of Cenvat Credit Rules, 2004. I find that the appellants have availed Cenvat credit in respect of common inputs used in the manufacture of dutiable as well as job work goods. The job work was undertaken under Notification No. 214/86 CE dated 25.03.1986. As per the said notification, job work goods are exempted from duty in the hands of job worker subject to the condition that they are either used by the principal manufacturer in the manufacture of finished goods on which duty is payable or removed as such by the said principal on payment of appropriate duty. Further, an undertaking to this effect has to be furnished by the principal manufacturer to the Assistant Commissioner of Central Excise having jurisdiction over the factory of job worker. I find that it is very clear from the above conditions that the job work goods are not exempted from duty as such. They can be cleared as such by the principal only on payment of duty. The appellant also refers to the case law of M/s. Sterilite Industries (I) Limited Vs. CCE Pune - 2005(185) ELT 353(Tri - LB) where in the Honorable Tribunal held that the credit of duty paid on inputs used in the manufacture of final products cleared without payment of duty by job worker for further utilization in manufacture of dutiable final product by principal manufacturer would not be hit by the provision of Rule 57C of the CER. 1944. 1944. I further find that in case of Bharat Fritz Werners Ltd Vs CCE Bangalore Ill Commissionerate, the Honorable CESTAT Bangalore in final order no. 1011/2005 dated 26. 2005 have decided that goods which ace sent to the principal manufacturer are not exempted goods. I therefore hold that the appellant is eligible for cenvat credit in respect of inputs used in the manufacture of job work goods which are further sent to their principal manufacturer under Notification No. 214/86. In view of above discussions, I set aside the OIO No.57/2005 dated 17. 2005 passed by the Assistant Commissioner of Central Excise, Rajajinagar division, and allow the appeal filed by M/s. South India Wire Products Pvt. Ltd., Bangalore. 2. We heard both sides in the matter. We notice that the issue is fully settled in assessee’s favour in terms of Larger Bench judgment of the Tribunal rendered in the case of M/s. Sterlite Industries (I) Ltd. Vs. CCE, Pune - 2005 (183) ELT 353 (Tri.-LB). The finding portion of this judgment in Para 3-6 are reproduced herein below. 3. We are also in agreement with the appellant’s contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situations in respect of the final product should be satisfied. Either the final product should be exempted, which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77) E.L.T. 350 (Tri.)] and after taking note of the Ministries clarifications issued vide Circular No. 10/75/CX. 6, it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term “exempted”has a definite connotation. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term “exempted”has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared in terms of provision of Rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In the present case, we find the job worker could have cleared the goods on payment of duty and manufacturer could have claimed credit of the same. It is only under the special procedure laid down in terms of the Rule 57F(3) that the duty does not get paid at the job worker’s end at the time of clearance of the goods, but ultimately gets paid at the manufacturer’s end. In these circumstances, we are in agreement with the decision rendered in the case of Bajaj Tempo and Jindal Polymers. 1. Apart from the above two decisions, we also note that identical view was taken in the case of Shakti Insulated Wires Ltd. v. CCE & C, Mumbai-V [2002 (149) E.L.T. 668 (Tri.) = 2002 (51) RLT 115 (CEGAT-Mum)] & also in the case of CCEx, Jaipur v. Noorani Textiles Mills [2000 (122) E.L.T. 744 (Tribunal)]. 4. In only case of Escorts Ltd. v. CC Ex, Delhi [2003 (160) E.L.T. 623 (Tri-Del.)] while interpreting Rule 57C of the Central Excise Rules, the Tribunal rejected the appellants claim of Modvat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, appellants other unit under Chapter X procedure and utilised in the manufacture of tractor which were cleared on payment of duty by observing that since no duty was paid on the part at the time of clearance, Rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [ 2004 (171) E.L.T. 145 (S.C.)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision. 8. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [ 2004 (171) E.L.T. 145 (S.C.)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision. 8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer. By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee. 5. As regards the decision in the case of Alpha Lavan laying down that the Modvat credit could be claimed in such a situation, we find the earlier decision of the Bajaj Auto was not followed. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee. 5. As regards the decision in the case of Alpha Lavan laying down that the Modvat credit could be claimed in such a situation, we find the earlier decision of the Bajaj Auto was not followed. However, in view of the facts that the ratio of Bajaj Auto decision stands approved by the Supreme Court decision in the case of Escort Ltd. referred supra, we are of the view that the Alpha Lavan is no longer good law. 6. In view of the foregoing, we answer the reference in favour of the assessee. The papers may be placed before the original Bench for passing the appropriate orders. 1. It is further brought to our notice, the decision rendered in the case of M/s. Bharat Fritz Werner Limited Vs. CCE, Bangalore by Final Order No.1011/2005 dated 6. 2005, by which this Bench allowed the assessee’s appeal. The findings recorded in Para 7 is reproduced herein below. 7. We have gone through the records of the case carefully. The appellants received certain dutiable inputs and manufactured machines. They utilised these machines for job work. After job work, the goods were sent under 57F(4) Challan to the principal manufacturers. The department is of the view that the machines manufactured by the appellant are exclusively used in the manufacture of the exempted goods. Therefore, the inputs are not entitled for Cenvat credit. In other words, the department is equating goods sent under 57F4 challan with exempted goods. This is not correct. The goods, which are sent to principal manufacturer, are not exempted goods. Ultimately, they would be cleared on payment of duty. Hence, the reasoning adopted by the department is not correct. Moreover, all the case-laws cited by the appellant are very relevant in deciding this issue. In the case of KSH International, the Tribunal rejected the Revenue appeal and held that clearance of goods on job work does not amount to clearance under full exemption or at Nil rate of duty. The ratio of this decision is squarely applicable to the present case. Under these circumstances, we allow the appeal and set aside the impugned order. In view of the cited judgments, we find no merit in this appeal and reject the same.