1993 (6) TMI 154 - AT - Central Excise

Summary

Issues:
- Eligibility of Hylam sheets for Modvat credit in drilling operations of copper clad laminations.

Analysis:
The judgment by the Appellate Tribunal CEGAT, MADRAS involved an appeal by the Collector of Central Excise, Coimbatore, challenging the decisions of the lower appellate authority allowing Modvat credit for Hylam sheets used in drilling operations of copper clad laminations. The Collector argued that Hylam sheets are not eligible for Modvat credit as they do not contribute to the final product. The Respondents contended that Hylam sheets are essential to prevent burring during drilling and are discarded after use. The key issue was whether Hylam sheets fall under the excluded category for Modvat credit under Rule 57A of the Central Excise Rules.

The Collector argued that Hylam sheets do not qualify as inputs for Modvat credit as they are used to avoid smear on epoxy laminates during drilling, which does not directly relate to the final product. The Collector relied on a previous Tribunal decision to support this argument. On the other hand, the Respondents emphasized the necessity of Hylam sheets in preventing burring during drilling for precision circuitry, highlighting that the sheets are discarded after use and do not contribute directly to the drilling function.

The Tribunal analyzed Rule 57A, which excludes certain items from the definition of inputs for Modvat purposes. The rule specifies that excluded items must be used for producing or processing goods or bringing about a change in any substance related to the manufacture of final products. The Tribunal determined that Hylam sheets, although used as protective covers during drilling, do not actively bring about any change in the substance being drilled. As a result, the Tribunal concluded that Hylam sheets do not fall within the excluded category and are eligible for Modvat credit. The decision was based on the lack of evidence showing that Hylam sheets perform functions that disqualify them as inputs for Modvat purposes. Consequently, the appeals filed by the Revenue were dismissed.