1995 (9) TMI 176 - AT - Central Excise

Summary

Issues:
1. Eligibility of photo film for MODVAT Credit in relation to the manufacture of a semi-automatic vertical reproduction camera.

Analysis:
The appeal addressed the issue of whether photo film used in the manufacturing process of a semi-automatic camera is eligible for MODVAT Credit. The appellants argued that the photo film is essential for setting parameters such as ensuring parallel planes for distortion-free images, determining the least count for magnification, and correcting the camera's operation. The Collector of Central Excise (Appeals) initially disallowed the MODVAT Credit, stating that the use of photo film was not essential for the manufacture of the camera. However, the appellants contended that adjustments made with the photo film were crucial before the camera could be marketed. They emphasized that the camera's technical specifications required the use of the film for quality control purposes.

The lower authority, while acknowledging the appellants' use of the photo film for setting parameters and ensuring distortion-free images, initially held that the film's use was not directly related to the camera's manufacture. The authority argued that the camera itself was complete without the additional processes involving the photo film. However, the appellants clarified that the camera was not marketable until adjustments for distortion and determining the least count were completed with the photo film. They highlighted that the film was not used for quality control but for setting operational parameters of the camera.

The learned DR adopted the lower authority's reasoning, emphasizing that the photo film's use was not integral to the camera's manufacture. However, the Tribunal held that any material essential for rendering goods marketable should be considered as used in relation to the manufacture of the final product. Therefore, the Tribunal allowed the appeal, stating that MODVAT Credit should be granted for the photo film consumed within the factory for the specific purposes outlined by the appellants. The decision was based on the principle that materials contributing to the marketability of the final product are eligible for MODVAT Credit, emphasizing the essential role of the photo film in the manufacturing process of the semi-automatic camera.