1994 (5) TMI 101 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat Credit on specific inputs used for manufacturing matrices
- Classification of matrices as intermediate products or final products
- Eligibility of matrices for Modvat benefit

Analysis:
1. The appeal was filed against the rejection of Modvat Credit on inputs used for matrices manufacturing. The Collector of Central Excise disallowed the credit and imposed a penalty, considering matrices as final products. The appellant argued that matrices are intermediate products under Rule 57D(2) and essential for making Gramophone Records.

2. The appellant highlighted inconsistencies in the authorities' findings, stating that matrices are not tools but equipment/appliance used in manufacturing records. Referring to Tribunal decisions, the appellant emphasized the importance of matrices in the manufacturing process and compared them to other eligible items like air bags in the tyre industry.

3. The Departmental Representative argued that matrices are appliances excluded under Rule 57A, hence ineligible for Modvat benefit. However, the tribunal noted that matrices containing recorded sound act as raw material in transferring music to records, gradually losing utility after multiple uses.

4. The tribunal considered the submissions and reviewed relevant decisions regarding the eligibility of inputs used in the preparation of matrices. It cited cases where items like BOPP films and Lap Films were considered consumable items for manufacturing specific products, supporting the view that inputs for matrices are also inputs for the final product.

5. Relying on past decisions, the tribunal concluded that matrices are intermediate products crucial for manufacturing records. It distinguished between final products and intermediate products based on captive consumption, asserting that matrices, containing recorded music, are essential raw materials progressively transferred to records.

6. The tribunal found the present case similar to previous decisions and ruled in favor of the appellant based on the nature and use of matrices as intermediate products in the manufacturing process.

7. The tribunal disagreed with the Collector's classification of matrices as final products, emphasizing their role as intermediate products crucial for making records. It referenced a High Court decision disapproving similar findings regarding sand moulds, asserting that matrices, containing valuable recordings, are raw materials progressively converted into the final product, records.

8. Consequently, the tribunal allowed the appeal, overturning the previous order disallowing Modvat Credit on inputs used for matrices and recognizing matrices as essential intermediate products in the manufacturing process of Gramophone Records.