1998 (3) TMI 296 - AT - Central Excise

Summary

Issues:
Whether duty-paid "Coated Abrasive Paper" is entitled to the benefit of Modvat credit in terms of Rule 57A.

Analysis:
The short question in this case revolved around the eligibility of duty-paid "Coated Abrasive Paper" for Modvat credit under Rule 57A. The lower appellate authority had allowed the credit based on precedents from earlier decisions of the Tribunal. The Revenue appealed this decision, arguing against the eligibility of the product for Modvat credit.

The Revenue pointed out a judgment in their favor in the case of Collector of Central Excise v. Indian Plywood Mfg. Co. Ltd., where Sand Paper was considered a tool excluded from Modvat credit. However, the Bench in the current case noted that the classification of goods under Tariff Headings was crucial in determining eligibility. Since "Coated Abrasive Paper" was classified under Heading 68 and not Chapter 82 which pertains to tools, it was deemed eligible for the benefit of Modvat credit.

The Bench referenced an earlier decision in the case of Andaman Timber Products, where it was established that the Tariff Classification was significant in Modvat context. Additionally, the judgment highlighted that the absence of evidence to categorize "Coated Abrasive Paper" as a tool in the market further supported its eligibility for Modvat credit. The Bench emphasized that the term "tool" should be interpreted based on commercial understanding in the absence of a statutory definition.

Moreover, the Bench noted that the Sand Paper in question was part of a machine in the Indian Plywood case, and a subsequent ruling confirmed that parts of a machine were not excluded from Modvat credit. The absence of evidence to establish "Coated Abrasive Paper" as a tool in the market further weakened the Revenue's argument. Relying on these considerations and previous judgments, the Bench rejected the Revenue's appeal, affirming the eligibility of "Coated Abrasive Paper" for Modvat credit under Rule 57A.