1997 (3) TMI 257 - AT - Central Excise

Summary

Issues:
1. Availability of Modvat credit for coated abrasive paper used in plywood production.
2. Interpretation of whether coated abrasive paper qualifies as an input for Modvat credit.
3. Conflict between the decision of the Southern Regional Bench and the Eastern Zone Division Bench.
4. Application of Rule 57 of the Central Excise Rules, 1944 in determining Modvat credit eligibility.

Analysis:
The judgment delivered by Appellate Tribunal CEGAT, CALCUTTA pertained to the issue of whether Modvat credit is available for coated abrasive paper used in polishing plywood. The Revenue contended that the abrasive paper should be treated as part of a machine/appliance rather than an input in plywood production. The Revenue relied on a decision by the Southern Regional Bench supporting their stance. However, the Tribunal noted a previous decision by the Eastern Zone Division Bench in favor of the respondent, which the Revenue failed to address. The Tribunal considered the respondent's argument that the abrasive paper is entitled to Modvat credit under Rule 57 of the Central Excise Rules, 1944. The Tribunal referenced specific paragraphs from the previous judgment, highlighting that the abrasive paper's function is distinct from shaping plywood and thus qualifies as an input for Modvat credit.

The Tribunal emphasized that the exclusion clause under Rule 57A should be strictly interpreted, and unless an input falls under the specifically excluded categories, it is entitled to Modvat credit as long as the final product is dutiable. The Tribunal referenced the Hon'ble Supreme Court's observations in a previous case to illustrate that two commodities with the same function can still be distinct and separate. The Tribunal noted that while Indian plywood considered the abrasive paper as a tool based on its function, it did not consider the Supreme Court's judgment in a relevant case before making that determination.

Ultimately, the Tribunal dismissed the Revenue's appeal, upholding the respondent's entitlement to Modvat credit for the coated abrasive paper used in plywood production. The decision was based on the Tribunal's interpretation of the abrasive paper's function and its qualification as an input under Rule 57 of the Central Excise Rules, 1944.