1997 (9) TMI 226 - AT - Central Excise

Summary

Issues: Eligibility of Modvat credit on duty paid for emery cloth belt and emery paper.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Mumbai involved the eligibility of Modvat credit on duty paid for emery cloth belt and emery paper. The Collector (Appeals) had initially held that both goods were not inputs as they were "identifiable with the equipment" and fell within the exclusion clause of Rule 57H. However, the Tribunal decided to rehear the issue, especially regarding the use of the articles in question. The appellant's advocate explained that the emery cloth belt was designed to be used in conjunction with rollers for grinding or polishing purposes. The Tribunal concluded that the belt was not an excluded input as it was used in the manufacture of the final product and was not covered by the exclusion clause. Therefore, Modvat credit on duty paid for the emery cloth belt was deemed eligible.

Regarding the abrasive emery paper, the appellant's advocate argued that it was used by hand for abrasive purposes and cited relevant precedents to support their claim. The Tribunal noted conflicting views in different regional benches on whether such paper should be considered an input. However, it was clarified that the emery paper was used independently by hand and did not require any additional machinery for its use. Therefore, it was concluded that the emery paper did not qualify as an input eligible for Modvat credit, affirming the Collector (Appeals) decision on this issue.

The appellant further contended that sandpaper should not be classified as a tool due to its consumable nature and argued that classification under Chapter 82 of the Tariff did not automatically exclude it from being considered a tool. The Tribunal analyzed relevant decisions and emphasized that the nature of an item being consumable did not preclude it from being classified as a part of a machine or equipment. The Tribunal clarified that the classification under Chapter 82 did not determine whether an item could be considered a tool. In this case, the sandpaper was deemed a tool falling within the excluded category, and Modvat credit was rightly denied.

In conclusion, the Tribunal allowed the appeal to the extent of granting Modvat credit on duty paid for the emery cloth belt, setting aside the Collector (Appeals) order on this matter. However, the decision regarding the emery paper was upheld, confirming the denial of Modvat credit for this item.