1997 (3) TMI 254 - AT - Central Excise

Summary

Issues:
1. Whether the input material used in the manufacture of tyres is eligible for Modvat credit under Rule 57A of Central Excise Rules, 1944?
2. Whether the decisions in favor of the respondents in previous cases are applicable in the current scenario?
3. Whether the Apex Court's decision regarding air bags and bladders as inputs for tyres is relevant to the present case?

Analysis:

Issue 1:
The case involved a dispute regarding the eligibility of certain input materials, diaphragm bags/air bags/curing bags, for Modvat credit under Rule 57A of the Central Excise Rules, 1944. The Revenue contended that these bags were akin to appliances/equipment/apparatus and, therefore, not eligible for Modvat credit. The Assistant Collector reversed the Modvat credit taken by the respondents, leading to an appeal. The lower appellate authority ruled in favor of the respondents, considering the bags as inputs covered by Rule 57A and not falling under the exclusion clause. The Revenue appealed against this decision.

Issue 2:
The Revenue argued that the decisions relied upon by the lower appellate authority were not conclusive, citing a decision by the South Regional Bench in a related case which classified the items as equipment due to their function in the tire manufacturing process. However, the Manager (Taxation) of the respondents' Company pointed out that a similar matter had been dismissed by the Apex Court, emphasizing the applicability of air bags and bladders as inputs for tires. The manager prayed for the dismissal of the Revenue's appeal based on the Supreme Court's observation.

Issue 3:
After considering the arguments presented by both sides, the judge agreed with the representative for the respondents' Company, referencing the Supreme Court's observation in a related case. The judge dismissed the Revenue's appeal, aligning with the Apex Court's decision regarding the treatment of air bags and bladders as inputs for the manufacture of tires. The judge found the plea of the respondents to be in line with the Supreme Court's observation and, therefore, ruled in favor of the respondents, upholding their eligibility for Modvat credit under Rule 57A.