1996 (3) TMI 254 - AT - Central Excise

Summary

Issues:
- Eligibility for Modvat credit on Triethylene Glycol used in the manufacture of polyester staple fibre/polyester yarn.

Analysis:
The judgment by the Appellate Tribunal CEGAT, New Delhi revolves around the common issue of determining the eligibility for Modvat credit on Triethylene Glycol utilized in the production of polyester staple fibre/polyester yarn. The appeals were heard jointly, and arguments were presented by both sides. The appellant's counsel contended that the Triethylene Glycol is an essential input used in the manufacturing process to clean the filter machine, crucial for preventing production standstill. The appellant cited previous Tribunal decisions supporting the eligibility of the input for Modvat credit. On the other hand, the respondent's counsel opposed these arguments.

Upon considering the submissions and reviewing the records, the Tribunal found that Modvat credit had been denied to the appellants based on the premise that Triethylene Glycol was used for maintenance rather than in the actual manufacturing process of the final product. The Tribunal disagreed with this view, emphasizing that the material must be used in the manufacture of the final product or in relation to it to qualify for Modvat credit. Referring to a previous case, the Tribunal clarified that the expression "in relation to the manufacture" has a broad significance, encompassing materials used outside the main manufacturing stream but crucial for the final product's production or marketability.

Applying this interpretation to the present case, the Tribunal concluded that Triethylene Glycol's use in cleaning equipment essential for manufacturing polyester fibre and yarn qualifies it as an input in the manufacturing process. Dismissing the notion that the material is solely for equipment cleaning, the Tribunal recognized the cleaning process as integral to manufacturing activities. As a result, the Tribunal set aside the impugned orders and allowed the appeals, granting the appellants the Modvat credit on Triethylene Glycol.