1995 (9) TMI 177 - AT - Central Excise

Summary

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

Analysis:
The appeal before the Appellate Tribunal CEGAT, Madras revolves around the eligibility of photo film for MODVAT Credit in the manufacturing process of a semi-automatic vertical reproduction camera. The appellants, manufacturers of such cameras, argued that the photo film is essential in ensuring the parallel alignment of the image plane, copy plane, and lens plane to avoid distortion in the final product. They contended that the photo film is used to determine the least count, aiding in setting parameters for the camera's operation. The Collector of Central Excise (Appeals) had disallowed the MODVAT Credit, stating that the use of photo film was not essential for the completion of the manufacturing process of the camera.

The lower authority's finding emphasized that the appellants' use of the photo film was not integral to the manufacturing process of the semi-automatic camera. It was noted that adjustments made with the help of the photo film, such as correcting distortion and determining the least count, were crucial before the camera could be marketed. The Tribunal acknowledged that the process described by the appellants was beyond mere quality control checks, as it involved setting operational parameters for the camera. The Tribunal also highlighted that any material necessary to render goods marketable could be considered as used in relation to the manufacturing of the final product.

In the judgment, the Tribunal, concurring with the appellants' arguments, held that the photo film was indeed essential for the manufacturing process of the semi-automatic camera. As the photo film was used and consumed within the factory for specific purposes related to ensuring the quality and functionality of the camera, the Tribunal allowed the appeal, granting MODVAT Credit for the photo film. The decision underscored the principle that materials contributing to the marketability of a finished product are eligible for such credits under the law.

In conclusion, the judgment by the Appellate Tribunal CEGAT, Madras, clarified the eligibility of photo film for MODVAT Credit in the manufacturing of a semi-automatic vertical reproduction camera. By emphasizing the essential role of the photo film in setting operational parameters and ensuring product quality, the Tribunal overturned the lower authority's decision and ruled in favor of granting MODVAT Credit for the photo film used by the appellants in their manufacturing process.