Strict construction of MODVAT rules excludes plant and machinery items from input credit, even when used in manufacture.

Synthetic Filter Cloth and Asbestos Mill Board used in the production process were held not to qualify as "inputs" for MODVAT credit under Rule 57A because the rule's Explanation excluded machines, machinery, plant, equipment, apparatus, tools and appliances used for producing or processing goods. Items forming part of the plant and machinery system fell within that exclusion, even if used in manufacture. The MODVAT scheme was required to be applied strictly, and its scope could not be expanded by liberal construction or by adding words to the rule. As a result, credit was not admissible on such excluded items.

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Issues: Whether Synthetic Filter Cloth and Asbestos Mill Board, used in the manufacturing process, were "inputs" eligible for MODVAT credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: Rule 57A allowed credit only for goods used in or in relation to the manufacture of final products, but its Explanation expressly excluded machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing goods or for bringing about any change in any substance in relation to the manufacture of final products. On the assessee's own description, both items were part of the plant and machinery system used in production and processing, and therefore fell within the excluded category. In construing MODVAT provisions, the applicable rule had to be applied strictly and could not be enlarged by adding words or by a liberal construction inconsistent with the exclusion.

Conclusion: The items were not eligible as "inputs" and MODVAT credit was not admissible.

Ratio Decidendi: Where a MODVAT provision contains an express exclusion for plant, machinery, equipment and similar items, the exclusion must be given strict effect and such items cannot be treated as "inputs" merely because they are used in the manufacturing process.

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