1997 (2) TMI 151 - AT - Central Excise

Summary

Issues:
1. Whether Dryer Press felt and Phosphor Bronze metallic wire can be treated as 'input' under Rule 57A of the Central Excise Rules, 1944.
2. Whether the said product fulfills the description given under the Explanation to Rule 57A.

Detailed Analysis:

Issue 1:
The reference application pertains to appeals where the manufacturer claimed Modvat credit for duty paid on Dryer Press felt and Phosphor Bronze metallic wire. The jurisdictional Assistant Commissioner rejected the claim, citing exclusion clause (i) of the Explanation to Rule 57A. The Collector (Appeals) upheld this decision, leading to the filing of appeals. The Larger Bench of the Tribunal concluded that these items, being parts of a machine, are not excluded under the said clause. Consequently, Modvat credit was allowed, and the appeals were upheld.

Issue 2:
The Tribunal interpreted Rule 57A broadly, considering goods "used in relation to the manufacture" as inputs. Various items like Felts, Phosphor Bronze, Wire Mesh, Wire cloth, Dandy cloth, and machinery spares were deemed to be used in the manufacture of final products. The Tribunal held that these items qualify as 'inputs' under Rule 57A. The Revenue contended that these items fall under the exclusion clause (i) of the Explanation to the Rule as parts of machines. However, the Tribunal differentiated between complete units and parts/components, ruling that the mentioned items are parts of machines and not standalone appliances. Therefore, they are considered 'inputs' and entitled to Modvat credit.

Judicial Decision:
The Tribunal found that Dryer Press felt and Phosphor Bronze metallic wire, being parts of a machine and used in manufacturing specified final products, are not excluded from the definition of 'input' by the exclusion clause (i) of the Explanation to Rule 57A. Consequently, the assessee is entitled to Modvat credit for duty paid on these goods. A question of law was identified, and a Statement of Case will be referred to the High Court of Bombay for further consideration and clarification.