Modvat credit on paper-manufacturing inputs upheld where wire mesh and felts qualified as inputs under Rule 57A.

Wire mesh, felts and similar items used in paper manufacture were treated as inputs under Rule 57A of the Central Excise Rules, so Modvat credit was admissible. The department's objection, including the point that a declaration had been filed under Rule 57T and the assessee had claimed depreciation under the Income Tax Act, did not justify denial of credit in view of settled Tribunal precedent and the Larger Bench decision relied on. The disallowance of credit was therefore set aside and the assessee's entitlement to Modvat credit was upheld.

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Issues: Whether Modvat credit was admissible on wire mesh, felts and similar items used in paper manufacture when treated as inputs under Rule 57A, notwithstanding the filing of a declaration under Rule 57T and the objection regarding availing depreciation under the Income Tax Act.

Analysis: The items in dispute were held to be inputs within the meaning of Rule 57A of the Central Excise Rules. The assessee's alternative plea had been raised before the Commissioner (Appeals) but no finding had been recorded on it. Following the settled view of the Tribunal and the Larger Bench decision cited, credit could not be denied on the ground urged by the department.

Conclusion: Modvat credit was admissible and the disallowance was set aside in favour of the assessee.

Final Conclusion: The assessee succeeded on the issue of eligibility to Modvat credit on the disputed items, and the order denying credit was reversed.

Ratio Decidendi: Goods used in manufacture are entitled to Modvat credit when they qualify as inputs under the applicable excise rule, and credit cannot be denied merely on the basis of the objection raised where the issue is covered by settled precedent.

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