1990 (12) TMI 247 - AT - Central Excise

Summary

Issues:
Modvat benefit eligibility for cleaning reducer, coating reducer, and vinyl reducers used in manufacturing pilfer-proof caps and crown corks.

Detailed Analysis:
The appeal was filed by M/s. Cans & Closures Ltd. against the Order-in-Appeal passed by the Collector of Central Excise (Appeals), Calcutta. The Collector held that the goods in question, namely cleaning reducer, coating reducer, and vinyl reducers, do not qualify as inputs used in the manufacture of the final products, thereby allowing the department's appeal and setting aside the Assistant Collector's order granting Modvat benefit. The Assistant Collector had initially accepted the claim for Modvat benefit related to these goods. However, the Collector (Appeals) disagreed, leading to the appeal by the company.

During the hearing, the company's counsel argued that the cleaning compound and other reducers were essential in the manufacturing process and should be considered as inputs used in the production of the final products. The counsel highlighted that the Modvat provisions cover goods used not only in the manufacture of final products but also those used in relation to their manufacture. Additionally, the counsel cited relevant case laws to support their argument, emphasizing that the inputs need not necessarily be present in the final product to qualify for Modvat benefit.

On the other hand, the Departmental Representative supported the Order-in-Appeal's reasoning, stating that the inputs were only used for cleaning raw materials and reducing specific gravity in paints and inks, without being part of the final product. The Department opposed the appeal and stood by the decision of the Collector (Appeals).

In delivering the judgment, the Member (T) noted that the inputs need not be physically present in the final product to be eligible for Modvat benefit. As long as they are used in or in relation to the manufacturing process and not explicitly excluded by relevant provisions, Modvat credit must be allowed. The Member considered the arguments presented by the company's counsel and the case laws cited, ultimately allowing the appeal and granting the appellants consequential reliefs.

In conclusion, the Appellate Tribunal ruled in favor of M/s. Cans & Closures Ltd., granting them Modvat benefit for the cleaning reducer, coating reducer, and vinyl reducers used in the manufacturing of pilfer-proof caps and crown corks. The judgment highlighted the broader scope of Modvat provisions and emphasized that the inputs need not be physically incorporated into the final product to qualify for the benefit.