1996 (8) TMI 222 - AT - Central Excise

Summary

Issues: Admissibility of Modvat on Polypropylene resin for metallised film, denial of Modvat on evaporation boats, graphite foils, and masking band.

In the judgment delivered by the Appellate Tribunal CEGAT, New Delhi, the appellants challenged the order passed by the Commissioner of Central Excise (Appeals), Indore, upholding the demand and penalty imposed by the Assistant Commissioner of Central Excise, Bhopal. The primary issue revolved around the admissibility of Modvat on Polypropylene resin used in the production of metallised polypropylene film by the appellant between October 1987 and March 1989. The dispute arose due to the lack of a specific declaration on the use of PP resins for the final product metallised film under Rule 57G of the Central Excise Rules. Additionally, the denial of Modvat on evaporation boats, graphite foils, and masking band was contested on the grounds that they were considered equipment and appliances, thus excluded from the definition of inputs under Rule 57A of the Central Excise Rules.

Upon hearing arguments from both parties, the Tribunal analyzed the situation concerning the denial of Modvat credit for PP resins. It was noted that PP resins were used for manufacturing both plain film and metallised film, with the raw material being the same for both products. The Assistant Commissioner acknowledged this fact and recognized that PP resins were the basic raw material for PP film, whether plain or metallised. Despite the absence of a specific declaration for PP resins as an input for metallised film, the Tribunal deemed the denial of Modvat credit unjustified, considering the actual use of inputs in the production of the final product cleared on duty payment. The Tribunal viewed the objection as technical and narrow, especially in light of the manufacturing process and previous declarations made by the appellant.

Regarding the other materials in question, the Tribunal distinguished between evaporation boats, graphite foils, and masking band. Evaporation boats and graphite foils were categorized as tools and equipment, thus rightly denied Modvat credit under Rule 57A. However, the masking band, made from specific materials and actively participating in the manufacturing process, was deemed eligible for Modvat credit as an input used in the production of the final product. Consequently, the Tribunal set aside the order denying Modvat credit on resin for metallised film, upheld the denial of credit for evaporation boats and graphite foils, and allowed Modvat credit for masking bands.

Furthermore, the Tribunal addressed the appellant's concession regarding the demand for excess credit, leading to a reduction in the penalty imposed from Rs. 5,000 to Rs. 1,000. The appeal was disposed of accordingly, with the cross objection also being resolved in line with the Tribunal's findings.