1993 (1) TMI 170 - AT - Central Excise

Summary

Issues:
- Eligibility of printer ribbons for Modvat credit under Rule 57A of the Central Excises and Salt Act, 1944.

Detailed Analysis:

Issue: Eligibility of printer ribbons for Modvat credit under Rule 57A

The appeal challenged the rejection of Modvat credit on printer ribbons used in the manufacture of printers for computers. The appellant argued that the ribbons were indispensable for the printer's functioning, as without them, the printer could not print anything. They emphasized the heavy functional dependence on ribbons and contended that since the ribbons were included in the assessed value of the printer for excise duty purposes, they should be considered an eligible input for Modvat credit. On the other hand, the respondent argued that the printer was a consumable and did not contribute to the manufacture of the end product, making it ineligible for Modvat credit.

The Tribunal referred to the ruling of the Supreme Court in the case of Kores (India) Ltd., where it was held that ribbons were accessories and not component parts of typewriters. The Tribunal found that the analogy between ribbons and printers was akin to that of ribbons and typewriters. It was noted that the printers were marketed with the ribbons inserted, but it was not a necessity for marketing the printers. The Tribunal concluded that the manufacture of printers was complete without the ribbons being fitted onto them, similar to typewriters. Therefore, the Tribunal upheld the decision of the Collector and dismissed the appeal, as the ribbons did not qualify as inputs for Modvat credit under Rule 57A.

In a separate observation, the Tribunal cited previous Supreme Court judgments emphasizing that items necessary to put goods in the market stream were eligible for proforma credit. However, in the context of the present case, the ribbons were deemed accessories and not essential components for the functioning or marketing of the printers. The Tribunal concurred with the view that the ribbons did not qualify as inputs under Rule 57A, as the printers could function without them and their inclusion did not alter the completion of the manufacturing process.

In conclusion, the Tribunal relied on the Supreme Court's precedent and the distinction between essential components and accessories to determine the eligibility of printer ribbons for Modvat credit. The ruling highlighted that the ribbons were not integral to the manufacturing process of the printers and therefore did not meet the criteria for Modvat credit under Rule 57A.