MODVAT credit on release paper allowed where the material directly participated in manufacture and became part of the final product.
Release paper used in the manufacture of coated cotton fabrics was treated as an eligible MODVAT input because it directly participated in the manufacturing process and part of the silicon coating transferred to the fabric formed part of the final product. Its repeated use did not convert it into machinery, plant, equipment, apparatus, tools or appliances, and in trade parlance it remained paper rather than excluded equipment. MODVAT credit under Rule 57A was therefore admissible, in line with supporting Tribunal reasoning.
Issues: Whether release paper used in the manufacture of coated cotton fabrics qualified as an input used in or in relation to manufacture for MODVAT credit under Rule 57A of the Central Excise Rules, or fell within the excluded category of machinery, plant, equipment, apparatus, tools or appliances.
Analysis: The release paper was not merely a carrier or conveyor of silicon compound. It participated directly in the manufacturing process, with part of the silicon coating being transferred to the fabric and becoming part of the final product. Mere repeated use of the paper did not convert it into equipment or appliance. On its ordinary meaning and in trade parlance, release paper was understood as paper and not as machinery, equipment, apparatus, appliance or tools. The reasoning of the other Tribunal Benches in favour of similar claims supported this view.
Conclusion: Release paper was an eligible input and did not fall within the excluded category under Rule 57A. The question was answered in favour of the assessee.
Final Conclusion: MODVAT credit on release paper was admissible and the appeals succeeded with consequential relief.
Ratio Decidendi: A material that directly participates in manufacture and becomes part of the final product is an input for MODVAT purposes and is not excluded merely because it is used repeatedly or serves a carrier function during production.
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