1996 (7) TMI 380 - AT - Central Excise

Summary

Issues:
- Eligibility of Modvat credit on certain inputs used in the manufacture of paper.
- Consideration of various chemicals and materials listed for Modvat credit.
- Application of the exclusion clause under Rule 57A Central Excise Rules.
- Determination of whether specific inputs qualify as eligible for Modvat credit.

Analysis:

The judgment from the Appellate Tribunal CEGAT, New Delhi involved an appeal against the denial of Modvat credit on certain inputs used in the manufacture of paper. The dispute centered around the classification of these inputs as eligible for Modvat credit under Rule 57A Central Excise Rules. The inputs in question were detailed in a tabular format, outlining their descriptions, uses, and the reasons provided by the lower authorities for denying Modvat credit.

The appellant's counsel argued that the water purifying chemicals listed as inputs were essential for purifying water used in steam generation for paper manufacture. Citing technical authorities and previous judicial decisions, the counsel contended that these chemicals were recognized as inputs in the manufacture of paper. Additionally, the counsel highlighted that certain materials like felts and synthetic fabrics were covered by a Larger Bench decision, affirming their eligibility for Modvat credit as they were parts of machinery used in paper manufacturing processes.

The Tribunal considered the submissions and applied the principles established in the Larger Bench decision regarding eligible inputs under Rule 57A. It concluded that water purifying chemicals and certain materials like felts, wire cloth, and dandy cover qualified for Modvat credit as they were integral to the paper manufacturing process. However, the Tribunal found that two inputs, wetnol and lissapol, which were organic surface active agents for cleaning felts, did not directly contribute to the machinery's operation and were more akin to maintenance materials. Therefore, Modvat credit was denied for these two inputs.

In summary, the Tribunal ruled that most inputs listed were eligible for Modvat credit under Rule 57A, except for wetnol and lissapol. The judgment clarified the distinction between inputs directly involved in manufacturing processes and those serving maintenance purposes, emphasizing the specific criteria for determining Modvat credit eligibility in the context of paper production.