2001 (12) TMI 720 - AT - Central Excise

Summary

Issues:
1. Modvat credit eligibility on lacquers used in the manufacture of gramophone records.

Analysis:
1. The Collector (Appeals) allowed Modvat credit on lacquers used in the manufacture of gramophone records, considering them as essential inputs for the process. The Collector relied on a previous decision by CEGAT to define what constitutes an input in the manufacturing process. The decision emphasized that inputs indispensable for the emergence of the final product and inextricably linked with the production stream are eligible for Modvat credit.

2. The Assistant Collector detailed the manufacturing process involving the use of lacquers in creating stampers for pressing PVC Compound to make gramophone records. The process explained the significance of lacquers in the initial phase of stamper production, establishing their essential role in the manufacturing process. The Assistant Collector equated the role of lacquers with that of dies, emphasizing their importance.

3. The Commissioner, in contrast, argued that stampers are not eligible for Modvat credit as they are considered tools or appliances rather than direct inputs in the manufacture of gramophone records. The Commissioner contended that since stampers are not eligible, lacquers used in their production should also not qualify for Modvat credit. The Commissioner's position was that lacquers are not directly used in or in relation to the manufacture of gramophone records.

4. The Tribunal, after hearing arguments from the Revenue and considering the material presented, upheld the decision of the Collector (Appeals). The Tribunal found that the Collector had adequately explained and justified the classification of lacquers as inputs, differentiating them from mere tools or appliances like dies. The Tribunal concluded that the Revenue's appeal lacked merit and upheld the original decision, dismissing the Revenue's appeal and affirming the eligibility of lacquers for Modvat credit in the manufacture of gramophone records.