Cenvat credit on wire cloth and wire mesh used in paper manufacture was upheld as admissible under input and component rules.

Cenvat credit on wire cloth, wire mesh and felt used in paper manufacture was held admissible because these materials were essential to the production process and not confined to merely dragging water. The denial that they were neither capital goods nor directly used in manufacture was rejected, as the materials were treated as inputs under Rule 57A or as spares and components under Rule 57Q. The Tribunal followed the earlier High Court ruling on the same question and accepted credit on such replaceable goods used in the paper manufacturing process.

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Issues: Whether Cenvat credit was admissible on wire cloth / wire mesh and felt used in the manufacture of paper.

Analysis: The credit had been denied on the footing that wire cloth was used only for dragging water and was neither capital goods nor directly used in manufacture. The appellate authority had found that wire cloth, wire mesh and similar materials were essential for manufacture of paper and fell within the scope of inputs under Rule 57A or as spares and components under Rule 57Q. The Tribunal followed the earlier High Court ruling which had resolved the same question in favour of admissibility of credit on such replaceable goods used in the paper manufacturing process.

Conclusion: Cenvat credit on the disputed wire cloth was admissible and the departmental appeal failed.

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