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TMI Blog1993 (12) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... tools in order to make them marketable. The appellants had filed declarations under Rule 57G for the purpose of availing credit of duty paid on grinding wheels and grinding belts, declaring these two items as raw materials for the manufacture of hand tools. As it appeared to the Department that the two items were not raw materials for the manufacture of hand tools as the grinding wheels were used to make the surface of the tools smooth and grinding belts were fixed to the machines on which grinding wheels were fitted and neither item form part of the end-product, show cause notices were issued to the appellants proposing disallowance of Modvat credit under Rule 57-I and proposing imposition of penalty. The appellants replied to the show cause notice both on the merits of the matter as well as submitting that the demands were barred by limitation as the extended period of limitation of 5 years was not available to the Department in view of the letter of the appellants dated 24-6-1987 wherein the exact nature of the items, manner of utilisation as well as the machines on which these were used had been explained to the Department. The Department rejected the contentions of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lify as an input for the purpose of Rule 57A. Alternatively grinding wheels and grinding belts are in the nature of consumables on which Modvat credit is admissible. 6. The next contention of the learned Consultant is that Modvat credit has been disallowed for the period between March 1987 to February 1989 and the show cause notices dated 15-10-1990, 8-11-1990 and 21-11-1990 are, therefore, entirely barred by limitation, being beyond the normal period of limitation of six months from the date of availment of Modvat credit. There has been no suppression on the part of the appellants and in fact the appellants had, in response to a letter of the Department dated 26-5-1987 informing that Modvat credit has been wrongly availed of by the appellants with respect to grinding wheels as these are actual attachments to machinery for grinding the finished products, clarified the position and described in detail the exact nature and application of these materials in the manufacture of hand tools. He submits that in appeal No. E/2100/91 and 2101/91 part of the demand is barred by limitation. 7. In reply the learned DR submits that Modvat credit has been rightly disallowed as grinding wheels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.T. 235, the ERT of the Tribunal has extended the benefit of modvat credit to aloxide paper (Abrasive paper for polishing plywood) the Bench relied upon its earlier view in the case of CCE v. Andaman Timber Industries Ltd. Following the ratio of the two case law cited supra we hold that the grinding belts are entitled to the benefit of Modvat credit. 10. As we have held that Modvat credit is available to both the items in dispute, we are not called upon to record any finding on limitation. 11. In the result we hold that grinding wheels and grinding belts are inputs used in relation to the manufacture of final products namely hand tools, eligible to Modvat credit under Rule 57A of the Central Excise Rules, 1944. We set aside the impugned orders and allow the appeals with consequential relief, if any, due to the appellants. Sd/- (Jyoti Balasundaram) Member Judicial Dated 15-2-1993 Sd/- (S.K. Bhatnagar) Vice President 12. [Order per: S.K. Bhatnagar, Vice President]. - With due respects to Hon ble Judicial Member my views and orders in the matter are as follows: 13. I observe from the catalogue filed by the appellant and the submissions made before us that bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts to the tune of Rs. 999/- vide Entry No. 401, date 7-3-1987 in Chart No. 1 whereas it is actually attachment to the machinery for grinding the finished products, i.e., hand tools. It appears that no MODVAT on such inputs under Rule 57A is admissible. Please adjust in the credit account or account current immediately the amount of Rs.999/- wrongly taken as credit. Particulars of deposit may please be intimated immediately." 17. The appellants had also replied to it vide their letter, dated 24th June 1987 at Annexure 5. In other words, the appellants have been put on notice and had been clearly told that no MODVAT on such inputs was admissible. 18. Therefore their continuing to avail MODVAT after this communication, was clearly erroneous. 19. Their reply shows that they did not agree with the interpretation of the officer. However, irrespective of their own views they were required to keep the official direction in mind. They should have at least taken the precaution of showing it as tentative or under protest and represented to the next higher authority and obtained the final orders of the proper officer beforehand. In the circumstances, although a formal show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Tribunal in the case of Straw Products Ltd. v. CCE (supra). The said decision appears to have been based on two grounds. First, the said Grinding wheels are only parts of machinery and not machinery which alone is excluded from the purview of Rule 57A and secondly the use of such wheels is in the manufacturing process and not in the manufacturing machinery. 27. As regards the Grinding belts Hon ble Member (J) has proposed to allow the benefit of Modvat following the decision in the case of Jaishree Timber Products v. CCE - reported at 1992 (62) E.L.T. 235 (T), in which the East Regional Bench of the Tribunal has extended the benefit of Modvat credit to Aloxide paper (abrasive paper) for polishing plywood. 28. Hon ble Vice President has proposed to deny the Modvat for both the Inputs namely, Grinding Belts and Grinding Wheels on the ground that both of them are integral components or replaceable parts of the belt grinding machine and DOP PELSCHLEIF MACHINE respectively. He has observed that each of these machines as a whole is used for grinding of the items manufactured by the appellants and that it is, therefore, incorrect to talk about the belt or the wheel i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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