1994 (5) TMI 102 - AT - Central Excise

Summary

Issues:
Admissibility of Modvat credit for ribbons used in the manufacture of Line Printers.

Detailed Analysis:

1. Background: The appeal concerns the admissibility of Modvat credit for ribbons used in the manufacture of Line Printers under Rule 57H of the Central Excise Rules, 1944. The Department disputed the credit extended to all inputs except ribbons.

2. Claim and Rejection: The respondents claimed Modvat credit for ribbons used in the manufacture of Line Printers. The Department denied credit for ribbons, citing non-declaration and exemption under the Central Excise Tariff Act, 1985. The Assistant Collector's decision was overturned by the Collector (Appeals), granting Modvat credit for ribbons.

3. Arguments by JCDR: The JCDR contended that ribbons are accessories, not eligible for Modvat credit, relying on a Tribunal order involving Wipro Infotech Ltd. The argument was that Line Printers are marketable without ribbons.

4. Respondents' Defense: The respondents argued that ribbons are essential for Line Printers' functionality and marketability, citing precedents where essential components were granted Modvat credit. They emphasized that conflicting Tribunal decisions necessitated a Larger Bench reference.

5. Tribunal's Analysis: The Tribunal reviewed conflicting decisions, noting the wide scope of "in relation to manufacture." Precedents highlighted the importance of items essential for marketability, not just manufacturing processes. The need for a Larger Bench reference was acknowledged due to differing interpretations.

6. Divergent Views: Two views emerged regarding Modvat eligibility: whether only manufacturing inputs or all items accompanying the final product qualify. The Tribunal noted discrepancies in decisions and the need for clarity on Modvat eligibility criteria.

7. Additional Evidence: The attention was drawn to invoices showing ribbons sold with Line Printers, reinforcing the argument for Modvat credit eligibility.

8. Decision for Larger Bench: Considering the conflicting interpretations and the importance of clarifying Modvat eligibility criteria, the Tribunal decided to refer the matter to a Larger Bench for resolution.

This detailed analysis outlines the key issues, arguments, precedents, and the Tribunal's decision to refer the case to a Larger Bench for further clarification on the admissibility of Modvat credit for ribbons used in the manufacture of Line Printers.