1988 (6) TMI 209 - AT - Central Excise

Summary

Issues:
1. Eligibility of plastic granules used for testing machines for MODVAT credit under Rule 57A of the Central Excise Rules.

Analysis:
The appeal was filed by the Collector of Central Excise, Coimbatore, against the order upholding the eligibility of plastic granules for MODVAT credit under Rule 57A. The respondents manufactured plastic processing machines for layflat tubings and requested to use duty credit on plastic raw materials for testing the machines. The Assistant Collector allowed this credit for paying duty on the machines. The Collector (Appeals) upheld this decision, leading to the current appeal.

The Appellant Collector argued that plastic granules were not used in relation to manufacturing the end product, as they were only used for testing the machines. Conversely, the respondent firm contended that Rule 57A covers materials used in or in relation to the final product's manufacture, including plastic granules used for testing. The plastic granules were crucial for testing the dye in the machines to ensure compliance with specifications.

After considering both arguments, the Tribunal referred to Rule 57A, which allows credit for goods used in or in relation to manufacturing the final product. The extrusion machines were fully manufactured before testing with plastic granules to detect defects. The Tribunal concluded that materials used for testing fully finished machines were not considered materials used in or in relation to manufacturing the final product, as per the MODVAT credit scheme. The exclusion of equipment and appliances used in manufacturing from the definition of inputs supported this decision. Therefore, the lower authorities' decision was deemed legally unsustainable, and the appeal by the Collector was allowed.