2000 (1) TMI 368 - AT - Central Excise

Summary

Issues:
1. Eligibility of Wire Mesh and Felts as 'inputs' for Modvat credit.
2. Interpretation of exclusion clause (i) of Explanation to Rule 57A of the Central Excise Rules.
3. Formulation and reference of a question of law to the Hon'ble High Court of Punjab and Haryana.

Analysis:

Issue 1: Eligibility of Wire Mesh and Felts as 'inputs' for Modvat credit
The appellants, who were manufacturers of paper and paper board, availed Modvat credit on inputs under Rule 57A of the Central Excise Rules. The dispute arose when the adjudicating authority disallowed Modvat credit on Wire Mesh and felts as inputs, alleging a contravention of the Modvat Rules. The Commissioner (Appeals) upheld the denial of Modvat credit on these inputs, leading the party to file an appeal against this decision. The Tribunal, in its Final Order, settled the issue in favor of the party, citing a previous decision of the Tribunal's Larger Bench in a similar case. The Tribunal held that Wire Mesh and Felts, used as parts of machine/machinery in the manufacture of paper products, were eligible 'inputs' for Modvat credit.

Issue 2: Interpretation of exclusion clause (i) of Explanation to Rule 57A
The Department filed a Reference Application, claiming a question of law had arisen from the case, seeking a reference to the Hon'ble High Court of Punjab and Haryana under Section 35G of the Central Excise Act. The Department argued that a similar question had been referred to the Hon'ble Bombay High Court in a previous case involving Wire Mesh and Felts as parts of a machine in paper manufacturing. The Tribunal recognized this as a question of law and referred it to the High Court of Bombay. In the present case, the Tribunal found that an identical question of law had arisen and decided to refer it to the Hon'ble High Court of Punjab and Haryana for interpretation.

Issue 3: Formulation and reference of a question of law
Although the Reference Application did not specify a question of law, the Tribunal, based on the Department's arguments and previous references, concluded that a question of law identical to the one referred to the Hon'ble Bombay High Court had arisen. The Tribunal accepted the Revenue's application, formulated a question of law regarding the exclusion of Wire Mesh and Felts from the definition of 'inputs,' and decided to refer it to the Hon'ble High Court of Punjab and Haryana under Section 35G of the Central Excise Act. A statement of the case would be drawn up for the reference.

In conclusion, the judgment addressed the eligibility of certain items as 'inputs' for Modvat credit, the interpretation of the exclusion clause in the Central Excise Rules, and the formulation and reference of a question of law to the High Court for clarification.