2002 (4) TMI 123 - AT - Central Excise

Summary

Issues:
- Denial of Modvat credit on toners cleared along with photocopiers
- Classification of toner as an accessory or consumable

Analysis:
1. Denial of Modvat Credit:
The case involved the denial of Modvat credit on toners cleared along with photocopiers by the department based on the argument that toner was not an eligible input. The adjudicating authority found the toner to be an accessory of the photocopier but did not accept it as being used in or in relation to the manufacture of the main machine. The lower appellate authority, on the other hand, considered the toner to be a consumable rather than an accessory. The appellants contended that the finding of the original authority regarding the toner being an accessory had become final and binding, and the appellate authority should not have disturbed it. The appellants consistently claimed the benefit of Rule 57B(1)(vi) which allowed Modvat credit for accessories of the final product cleared along with the final product, where the value of the accessory was included in the assessable value of the final product.

2. Classification of Toner:
The argument presented by the appellants was that the toner was an essential part or accessory of the photocopier, similar to an ink cartridge in a printer. The appellants referred to the definition of toner and analogies with typewriter ribbons to support their claim. The Tribunal found that the toner being cleared along with the photocopier and its value included in the assessable value of the photocopier was not in dispute. The Tribunal also considered relevant case law, including the Apex Court's decision in a similar case involving typewriter ribbons, to support the finding that the toner was indeed an accessory of the photocopier. The Tribunal differentiated this case from previous decisions where the value of toner was in question, emphasizing that in the present case, both parties accepted the inclusion of toner value in the assessable value of the photocopier.

3. Judgment:
After analyzing the submissions and case law, the Tribunal set aside the order of the Commissioner (Appeals) and affirmed the finding that the toner was an accessory of the photocopier. The Tribunal held that Modvat credit of the CVD paid on the toner was admissible to the appellants under Rule 57B(1)(vi). The appeal was allowed, granting consequential reliefs to the appellants. The judgment clarified the classification of toner as an accessory in the context of Modvat credit eligibility, emphasizing the importance of consistent findings and legal provisions in determining such eligibility.