1996 (8) TMI 304 - AT - Central Excise

Summary

Issues:
Admissibility of Modvat credit for Coated Abrasives used in the factory for polishing watch components.

Analysis:
The appeal concerns the admissibility of Modvat credit for Coated Abrasives used in the factory for polishing watch components. The items in question include Flap Brush/Abrasive Brush, W.P. Paper Disc, and R.R. Clutch Belt/A.C. Belt. The appellant argues that the issue is covered by a decision of the Larger Bench in a different case. The Tribunal has considered the scope of the exclusion clause under Rule 57A, specifically examining the terms apparatus, appliances, machines, machinery, plant, and tool excluded from the Modvat Scheme. The Tribunal emphasizes the self-contained or complete nature of goods eligible for Modvat credit. The absence of specific reference to spare parts in the exclusion clause is noted, indicating that spares of machinery may also be eligible inputs. The Tribunal clarifies that only "self-contained, complete or whole" machines are excluded, not parts thereof.

The Department argues that the goods in question are not eligible for Modvat credit, citing Para 29 of the judgment. The Department contends that certain items used in the manufacture of paper are parts of machines and not covered by the exclusion clause. The Department further argues that copper wire used in the manufacture of metal containers does not qualify as an "appliance" under the exclusion clause. The learned Advocate for the appellant refers to the lower authority's order, which states that the items in question are parts of machinery and not consumables. However, the appellant argues that these items are consumables due to their function and wear out, requiring periodic replacement.

After considering the arguments, the Tribunal finds that the items in question are used for polishing components and are not component parts of machinery in the same sense as items used in paper mills. The Tribunal holds that the appellant is entitled to Modvat credit for the Coated Abrasives used in the factory for polishing watch components. The decision is made in favor of the appellant, allowing the Modvat credit as claimed.

In conclusion, the Tribunal's judgment clarifies the eligibility of Modvat credit for specific items used in manufacturing processes, emphasizing the distinction between self-contained goods and parts of machinery. The decision provides guidance on interpreting exclusion clauses under Rule 57A and highlights the importance of considering the functional use of items in determining Modvat credit eligibility.