2003 (3) TMI 144 - AT - Central Excise

Summary

Issues Involved:
Eligibility of Modvat credit on Molybdenum wire used in the manufacture of Tungsten filament under Rule 57A of the Central Excise Rules, 1944, for the period December 1996 to July 1997.

Issue-wise Detailed Analysis:

1. Background and Usage of Molybdenum Wire:
The appellants manufactured Tungsten filaments and used Molybdenum wire as a mandrel for coiling the Tungsten wire. The Molybdenum wire was dissolved in an acid mixture, leaving behind the Tungsten filament ready for use. The appellants claimed Modvat credit on the Molybdenum wire under Rule 57A.

2. Show Cause Notices and Lower Authorities' Decisions:
Two show cause notices were issued, proposing to disallow the credit on the ground that Molybdenum wire was a consumable 'appliance' and not an eligible input under Rule 57A. The original authority disallowed the credit and imposed a penalty, relying on the Tribunal's decision in M/s. Apar Ltd. v. CCE. The Commissioner (Appeals) upheld this decision, following the Tribunal's decision in Jay Electric Company v. CCE, Surat.

3. Appellants' Arguments:
The appellants argued that the Central Board of Excise and Customs (CBEC) had clarified in Circular No. 267/63/91-CX. 8 that Molybdenum wire was eligible for input-credit under Rule 57A. They cited several Supreme Court decisions to support the binding nature of the Board's circular on the Revenue. They contended that the interpretation in Jay Electric was incorrect and that the Board's Circular had not been considered in Apar Ltd.'s case.

4. Respondent's Arguments:
The respondent argued that the Board's Circular was not binding on the Tribunal and cited various dictionary definitions to show that 'tools' and 'appliances' are interchangeable terms. They relied on the Tribunal's decisions in Apar Ltd. and Jay Electric to argue that Molybdenum wire was a tool or appliance.

5. Tribunal's Analysis and Findings:
The Tribunal examined the relevant provisions and noted that during the disputed period, Rule 57A excluded tools or appliances from the category of inputs eligible for credit. The Tribunal found that the CBEC had ruled out Molybdenum wire as a tool or appliance. The Tribunal also noted that the WZB in Jay Electric did not consider the Board's Circular or the decision of the SZB in Vijil Filament, which held Molybdenum wire as an eligible input. The Tribunal referred to the Larger Bench decision in Union Carbide India Ltd. v. CCE, which held that copper wire used in manufacturing tin containers was not a tool or appliance.

6. Conclusion:
The Tribunal concluded that Molybdenum wire, which was consumed or destroyed in a single use, could not be considered a tool or appliance. It endorsed the Board's view that Molybdenum wire used in the manufacture of Tungsten filament was not a tool or appliance within the meaning of the exclusion clause under Rule 57A or Rule 57B. The Tribunal overruled the decisions in Apar Ltd. and Jay Electric and allowed the appeal, setting aside the impugned order of the Commissioner (Appeals).

Judgment:
The appeal was allowed, and the impugned order of the Commissioner (Appeals) was set aside. The Tribunal held that the appellants were entitled to Modvat credit on Molybdenum wire used in the manufacture of Tungsten filament for the disputed period.