1997 (4) TMI 285 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 57A of the Central Excise Rules, 1944 regarding the classification of certain goods as "inputs" for Modvat credit.
Whether goods claimed to be "inputs" are excluded from Rule 57A by the exclusion clause (i) of the Explanation to the Rule.

Detailed Analysis:

Issue 1: Interpretation of Rule 57A
The case involved reference applications under Section 35G(2) of the Central Excise Act, 1944 regarding the classification of Dryer Press Felt and Phosphor Bronze Metal wire as "inputs" for Modvat credit. The Commissioner of Central Excise contended whether these products could be treated as "inputs" as per Rule 57A and the Explanation. The Tribunal, after considering various legal precedents, held that the goods in question were indeed used in relation to the manufacture of final products, such as Paper Board, and thus qualified as "inputs" under Rule 57A.

Issue 2: Exclusion Clause (i) of the Explanation
The main contention revolved around whether the goods claimed as "inputs" were excluded from the operation of Rule 57A by the exclusion clause (i) of the Explanation. The Revenue argued that since the goods, including Felt, Phosphor Bronze, Wire Mesh, Wire cloth, and Dandy cloth, were parts of machines, they fell under the exclusion clause and were not eligible for Modvat credit. However, the Tribunal analyzed the scope of the exclusion clause and determined that the mentioned goods were indeed parts of machines but did not fall within the ambit of the exclusion clause as it did not specifically refer to "parts or components." Additionally, it was clarified that Copper Wire was not considered a part of a machine or appliance. Therefore, the Tribunal concluded that the goods claimed as "inputs" were eligible for Modvat credit under Rule 57A.

Conclusion:
The Tribunal, after thorough analysis, held that the goods in question, namely, Dryer Press Felt, Phosphor Bronze Metal wire, Wire Mesh, Wire cloth, and Dandy cloth, were considered "inputs" for the purpose of Rule 57A of the Central Excise Rules, 1944. The exclusion clause (i) of the Explanation did not apply to these goods as they were deemed parts of machines but not explicitly covered by the exclusion clause. Consequently, the appellants were entitled to the benefit of Rule 57A, and the Modvat credit claim was upheld. The case was referred to the High Court of Bombay for consideration of a specific legal question arising from the Tribunal's decision.