1990 (9) TMI 223 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for set-off of duty under Notification 95/79 as amended by Notification 58/82.
2. Classification and use of air bags/curing bags and bladders in tyre manufacturing.
3. Interpretation of the term "inputs" in the context of the relevant notifications.
4. Repeated use of items and their classification as inputs.

Issue-wise Detailed Analysis:

1. Eligibility for set-off of duty under Notification 95/79 as amended by Notification 58/82:
The appellants sought the benefit of set-off of duty for synthetic rubber, carbon black, and rubber processing chemicals used in the manufacture of air bags/curing bags and bladders, which are then used in tyre manufacturing. The Assistant Collector initially denied this benefit, and the Collector (Appeals) upheld this decision, stating that these items are not raw materials or component parts that go into the final product. The appellants withdrew their claim under Notification 201/79 and focused solely on Notification 95/79 as amended by Notification 58/82. The Tribunal directed the preparation of a technical write-up on the tyre manufacturing process to understand the use of these items.

2. Classification and use of air bags/curing bags and bladders in tyre manufacturing:
The technical write-up revealed that air bags, curing bags, and bladders are used in the tyre manufacturing process. These items are essential for the production of tyres, as they are involved in the curing process. The Tribunal examined whether these items could be classified as inputs under the relevant notifications. The Tribunal noted that the manufacturing process and flow chart confirmed the use of these items in tyre production.

3. Interpretation of the term "inputs" in the context of the relevant notifications:
The appellants argued that the term "inputs" should be interpreted broadly, based on previous Tribunal decisions. The Tribunal referred to several cases, including Hindustan Lever Ltd. v. C.C.E., Bombay and C.C.E., Bhuvaneswar v. Titaghur Paper Mills, where it was held that inputs do not need to go directly into the finished product but can be consumed or utilized in the production process. The Tribunal agreed with this interpretation, stating that air bags, curing bags, and bladders are inputs used in the manufacture of tyres.

4. Repeated use of items and their classification as inputs:
The learned DR contended that items used repeatedly until worn out, like air bags and bladders, cannot be considered inputs. However, the Tribunal referred to the decision in M/s. Bombay Tyres International Ltd. v. C.C.E., Bombay, which held that inputs do not necessarily have to be used directly in manufacture but can be used in relation to manufacture. The Tribunal concluded that air bags and bladders are not appliances or equipment but are indeed inputs entitled to exemption under the notification.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, granting the appellants the benefit of set-off of duty under Notification 95/79 as amended by Notification 58/82. The appellants were also entitled to adjust the credit of duty already paid in RG-23A Part II, which came into effect from 1-3-1986. The appeal was allowed with consequential relief.