1996 (6) TMI 308 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Modvat credit for certain inputs under Rule 57A of the Central Excise Rules, 1944.
2. Interpretation of the exclusion clause in Rule 57A regarding machinery and its parts.
3. Applicability of aids like Rules of Interpretation, Section Notes, and Chapter Notes for construing terms in Rule 57A.

Summary:

1. Eligibility of Modvat Credit for Certain Inputs:
The appeals involve manufacturers of excisable final products who availed Modvat credit for certain goods claimed as inputs under Rule 57A of the Central Excise Rules, 1944. The Assistant Collectors disallowed the Modvat credit, and the Collector (Appeals) had conflicting views in different cases. The Tribunal had to decide whether items like spare parts of machinery, dryer felt, Phosphor Bronze, Metal cloth, and others used in manufacturing processes qualify as "inputs" for Modvat credit.

2. Interpretation of the Exclusion Clause in Rule 57A:
The Tribunal examined the exclusion clause (i) of the Explanation to Rule 57A, which excludes "machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of final products." The Tribunal held that items like felt, Phosphor Bronze, stainless steel wire mesh, lin cloth, and Dandy cloth used in the paper-making process are "goods used in relation to the manufacture of paper" and hence are "inputs" under Rule 57A. However, the Tribunal clarified that spare parts of machinery do not fall under the exclusion clause as they are not self-contained units.

3. Applicability of Aids for Construing Terms in Rule 57A:
The Tribunal noted that Rules of Interpretation, Section Notes, and Chapter Notes in the Central Excise Tariff Act could be used as aids in construing Rules and Notifications where the language is unclear and requires interpretation. However, their relevance depends on the context and the clarity of the language used in the provision under consideration.

Conclusion:
The Tribunal concluded that:
- Felts, Phosphor Bronze, stainless steel wire cloth, wire mesh, and Dandy cloth used in the manufacture of paper and paper products are eligible inputs under Rule 57A and are not excluded by the exclusion clause.
- Copper wire used in the manufacture of metal containers is an eligible input and is not excluded as an "appliance."
- The appeals were disposed of accordingly, with some appeals allowed and others dismissed based on the Tribunal's findings.

Separate Judgment:
Member (T), Lajja Ram, dissented, holding that parts of paper-making machinery are not eligible for Modvat credit under Rule 57A when machinery as such is not eligible. He agreed with the majority view only regarding the copper wire used in the manufacture of metal containers.