1997 (10) TMI 229 - AT - Central Excise

Summary

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

Analysis:
The judgment revolves around the eligibility of Modvat credit on the duty paid for emery belt and emery paper. The Collector (Appeals) 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, upon rehearing the issue, it was determined that the emery belt, designed for use with rollers for grinding or polishing, was not an excluded input. The belt's characteristics and use with rollers indicated its eligibility for credit, following the Larger Bench decision in Union Carbide India Ltd. v. Collector of Central Excise, Calcutta. It was established that the belt was used in the manufacture of the final product, justifying the credit taken on the duty paid.

Regarding abrasive emery paper, the advocate argued that it was used independently by hand and relied on previous decisions to support its inclusion as an input. However, the judgment differentiated the use of paper in this case from previous decisions. It was highlighted that the paper was used independently without the need for additional machinery, unlike the coated paper discussed in Delta Panel Products P. Ltd. decision. The judgment emphasized that the paper's independent use distinguished it from being classified as an input, contrary to the advocate's arguments.

The advocate further contended that sandpaper should not be considered a tool due to its consumable nature and classification under Chapter 82 of the Tariff. However, the judgment rejected this argument, clarifying that not all tools classified under Chapter 82 and that the nature of use determines the classification. The paper was deemed a tool under the excluded category of Rule 57A, used for processing goods to achieve specific finishes. Consequently, credit for emery cloth belt was allowed, overturning the Collector (Appeals) decision, while the denial of credit for emery paper was upheld.

In conclusion, the appeal was allowed for the credit taken on the duty paid for the emery cloth belt, setting aside the Collector (Appeals) order, while confirming the decision on emery paper.