2010 (3) TMI 278 - HC - Central Excise

Modvat / Cenvat Credit - felt cloth and wire netting - part of machines Held that the assessee is entitled to avail the modvat credit on the inputs/material used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. - that use of felt cloth and wire netting would be entitled to modvat credit when used in manufacture of final products

Summary

Issues:
Interpretation of Rule 57-A for claiming modvat credit on inputs used in the manufacture of final products, specifically felt cloth and wire netting.

Analysis:
The judgment revolves around the interpretation of Rule 57-A concerning the entitlement of manufacturers to claim modvat credit on inputs used in the manufacture of final products, focusing on felt cloth and wire netting. The Tribunal referred a substantial question of law regarding the availability of credit of duty paid on these materials, which are part of machines used in the production of paper and paper products. The provisions of Rule 57-A aim to provide incentives to manufacturers for expanding their business premises in India. It allows manufacturers to claim modvat credit on specified duty paid on inputs used directly or indirectly in the manufacture of final products. However, there is a restriction under section 57B(2) that prohibits claiming credit on certain items like machines and capital goods.

The judgment cites the decision in Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd., where the Supreme Court held that materials used in the manufacture of final products qualify for modvat credit as inputs. It also references previous cases where the courts ruled in favor of considering items like wire mesh and felt as inputs eligible for modvat credit. Based on these precedents, the High Court concluded that felt cloth and wire netting used in the manufacturing process of paper and paper board products are indeed eligible for modvat credit. Therefore, the question posed by the Tribunal was answered in favor of the assessee and against the revenue.

In essence, the judgment clarifies the scope of modvat credit under Rule 57-A, emphasizing the eligibility of certain materials like felt cloth and wire netting as inputs for claiming credit in the manufacture of final products. The decision aligns with previous judicial interpretations and provides a clear understanding of the entitlement of manufacturers to avail such credits within the specified legal framework.

(ASHUTOSH MOHUNTA)
JUDGE

(MEHINDER SINGH SULLAR)
AS JUDGE

March 22, 2010