1991 (3) TMI 268 - AT - Central Excise

Summary

Issues:
- Appeal against the order of the Collector of Central Excise (Appeals), Madras dated 29-7-1988.
- Eligibility of wire mesh and woollen felts for MODVAT credit under Rule 57-A of the Central Excise Rules, 1944.
- Classification of wire mesh and woollen felts as parts of paper making machinery or raw materials.

Analysis:
1. The appeal was filed challenging the order of the Collector of Central Excise (Appeals), Madras dated 29-7-1988. The appellant's consultant acknowledged a previous order by the Tribunal that was unfavorable to him but decided to focus the arguments solely on wire mesh and woollen felts. The consultant argued that these materials are known as raw materials in the paper trade and should be considered part of the manufacturing process of paper, not as tools or appliances related to the paper machine. He cited a previous case involving graphite electrodes to support his claim for MODVAT credit for wire mesh and woollen felts based on their usage in the paper-making process.

2. The Senior Departmental Representative (SDR) contended that wire mesh and woollen felts should be classified as appliances, making them ineligible for MODVAT credit. The SDR argued that these items are essential for the functioning of the paper machine, indicating their nature as appliances rather than raw materials.

3. The Tribunal observed that wire mesh and woollen felts are utilized in the paper machine section of the paper mill to ensure the functionality of the machine. Referring to a previous Tribunal order, it was noted that these items, including dandy covers, wire netting, and woollen felts, are considered parts of the paper-making machinery. The Tribunal emphasized that while these items contribute to the paper-making process by facilitating machine functionality, they do not directly participate in the manufacturing process leading to the final paper product. The Tribunal highlighted the purpose of the MODVAT scheme to reduce the duty cascading effect on finished products by providing relief on duty paid for goods used in or related to manufacturing. Machinery, equipment, and apparatus were excluded from MODVAT credit, and parts essential for machinery functionality were also deemed ineligible for the scheme. The Tribunal concluded that wire mesh and woollen felts were rightly denied MODVAT credit as they did not meet the criteria of direct involvement in the manufacturing process leading to the end product.

4. The Tribunal upheld its previous findings and rejected the appeal, affirming that wire mesh and woollen felts were not eligible for MODVAT credit under Rule 57-A of the Central Excise Rules, 1944.