1991 (8) TMI 179 - AT - Central Excise

Summary

Issues:
1. Eligibility for MODVAT credit on tissue paper converted to wax paper.
2. Interpretation of Rule 57A regarding the definition of 'input.'
3. Determination of wax paper as an intermediate product.
4. Applicability of MODVAT credit under Rule 57D and Rule 57J.
5. Impact of Notifications 217/86 and 214/86 on MODVAT credit eligibility.

Analysis:
1. The main issue in this case is the eligibility of the respondents for MODVAT credit concerning tissue paper converted into wax paper. The Collector of Central Excise (Appeals), Madras, held that wax paper, being a different commodity from tissue paper, could not be considered an input for MODVAT credit. However, the lower appellate authority disagreed, considering wax paper as an intermediate product and allowing the MODVAT credit claim.

2. The appellant-Collector argued that tissue paper was not the actual packing material used, but wax-coated paper, and since duty was not paid on the wax-coated paper, MODVAT credit should not be granted. The appellant contended that Rule 57C prohibits credit if the final product is duty-exempt, which applied in this case after tissue paper was converted to wax paper.

3. The Department's representative argued that once an input like tissue paper was processed into a different excisable product (wax paper) exempt from duty, MODVAT credit should not apply. The consultant for the respondents maintained that wax paper was an intermediate product eligible for MODVAT credit under Rule 57D, citing relevant precedents and notifications supporting their claim.

4. The Tribunal analyzed Rule 57A, which includes packing material in the definition of 'input,' allowing MODVAT credit for materials used in the manufacturing process. However, the Tribunal determined that wax paper, resulting from tissue paper processing, did not qualify as an intermediate product under Rule 57D or Rule 57J, thus denying MODVAT credit on tissue paper.

5. Lastly, the Tribunal dismissed another appeal by M/s. Indo Swing Ltd., upholding the decision regarding tissue paper not being an input for MODVAT credit due to its conversion into wax paper. The decision was consistent with the ruling on the previous appeal, emphasizing the ineligibility of MODVAT credit in such circumstances.

In conclusion, the Tribunal held that the conversion of tissue paper into wax paper did not entitle the respondents to MODVAT credit, as wax paper was not considered an intermediate product in the manufacturing process. The judgment emphasized the specific provisions of Rule 57A and the inapplicability of MODVAT credit under Rule 57D and Rule 57J in this context, ultimately ruling in favor of the Revenue and dismissing the appeals.