1996 (10) TMI 310 - AT - Central Excise

Summary

Issues:
Whether Graphite Boats, Graphite powder, and solvent used by the appellants can be considered eligible for Modvat credit under Rule 57A of the Central Excise Rules in the manufacture of metallised plastic films.

Analysis:
The jurisdictional Assistant Commissioner initially held that the items in question fall within the excluded category of inputs under the explanation to Rule 57A, stating that they do not play a role within the scope of the definition of the term under Rule 57A. Specifically, the Assistant Commissioner noted that the Graphite boats do not enter the final product and, therefore, denied the Modvat credit based on this reasoning. This decision was upheld by the Commissioner (Appeals), leading to the appeals before the Tribunal.

The appellants argued that the Graphite boats, Graphite powder, and solvent are essential consumables in the process of vacuum metallising plastic films, as described in detail in their Appeal Memo. They emphasized that these materials interact with molten aluminum to ensure uniform deposition over the plastic film in the vacuum chamber. Citing a Larger Bench decision in a related case, they contended that consumable items like the Graphite boats should be considered inputs eligible for Modvat credit.

In response, the learned JDR referred to the same Larger Bench decision and acknowledged that the Graphite boats could be classified as appliances drawing energy for the specific task of aluminum evaporation in metallising. The Tribunal considered the precedent set by the Larger Bench in previous cases, emphasizing that items used in any activity related to the manufacture of finished goods should be eligible for Modvat credit. Applying this interpretation to the present case, the Tribunal concluded that the Graphite boats, Graphite powder, and solvent are integral to the metallising process and should be deemed eligible for Modvat credit as inputs used in relation to the manufacture of the final product.

Based on the detailed analysis of the functions and interactions of the materials in question, as well as the broader interpretation of Rule 57A provided by the Larger Bench decisions, the Tribunal set aside the impugned orders and allowed the appeals. The judgment highlights the importance of considering the role of materials in the manufacturing process and interpreting the rules to encompass items that contribute to the production of the final goods, even if they do not directly become part of the finished product.