1992 (11) TMI 183 - AT - Central Excise

Summary

Issues:
- Eligibility of modvat credit for Silicon Carbide Grains and Adhesive Tapes used in manufacturing needle rollers.
- Permissibility of raising new grounds in appeal beyond the scope of the show cause notice.
- Interpretation of Rule 57A of Central Excise Rules regarding the exclusion of certain items from modvat benefit.

Analysis:
1. Eligibility of Modvat Credit: The appeal was filed regarding the eligibility of M/s. Shriram Needle Bearing Industries Limited to claim modvat credit for Silicon Carbide Grains and Adhesive Tapes used in manufacturing needle rollers. The Assistant Collector had granted them the benefit of modvat credit, but the Collector (Appeals) partially allowed the department's appeal, contending that the Silicon Carbide Grains were used for repair of equipment and thus ineligible for modvat credit under Rule 57A. The company argued that the grains were consumable items used in the manufacturing process, not tools, as held by the Assistant Collector.

2. New Grounds in Appeal: The company contended that the department's new ground in the appeal, beyond the show cause notice, was impermissible. The learned Advocate cited Tribunal decisions emphasizing that new allegations not mentioned in the show cause notice should not be raised at the appellate stage. The company also disputed the department's claim that the Silicon Carbide Grains were used for repair of equipment, stating they were used for rough polishing of needle rollers, making them eligible for modvat credit.

3. Interpretation of Rule 57A: The Departmental Representative argued that the nature of use of Silicon Carbide Grains for rough polishing of needle rollers precluded their eligibility for modvat credit under Rule 57A. However, the company maintained that the grains were consumable items used in the manufacturing process, not tools, as alleged by the department.

4. Judgment: The Judge considered the submissions and ruled in favor of the appellants, allowing the appeal. The Judge reiterated that raising new grounds beyond the show cause notice in appeal was impermissible. Additionally, the Judge referenced various decisions supporting the proposition that items excluded from modvat benefit are those specifically mentioned in the Explanation of Rule 57A. Given the clear position on merits, the Judge allowed the appeal, emphasizing that any product used in machines should not be excluded from modvat benefit.

This judgment highlights the importance of adherence to show cause notices, the interpretation of rules governing modvat credit eligibility, and the significance of established case law in determining the outcome of appeals in excise matters.