Modvat credit for consumable mandrel wire allowed where the item was not a tool, appliance or machinery

Plain molybdenum wire used only as a mandrel in coiling tungsten filament, and then wholly dissolved in acid treatment, was held not to be a tool or appliance within the exclusion under Rule 57A and Rule 57B. Because it had only a transient, consumable role in manufacture and no independent functional character as machinery, equipment or appliance, it remained an eligible input for Modvat credit. The binding departmental circular also supported that classification, and contrary earlier Tribunal views were not accepted.

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Issues: Whether plain Molybdenum wire used as a mandrel in the manufacture of Tungsten filament was an eligible input for Modvat credit or was excluded as a tool or appliance under Rule 57A of the Central Excise Rules, 1944 and Rule 57B of the Central Excise Rules, 1944.

Analysis: The exclusion clause in Rule 57A, and later the corresponding bar in Rule 57B, prevented credit for machines, machinery, plant, equipment, apparatus, tools and appliances used for producing or processing goods or used for any purpose in the factory. The Molybdenum wire was directly used in the manufacturing process, but it had only a transient role as a mandrel for coiling tungsten wire and was completely dissolved in the acid treatment after coiling. The Board had also clarified that such wire was not to be treated as a tool. The Board's interpretation was binding on the Revenue, and the material did not satisfy the test of a tool, machine or appliance as explained in the Larger Bench decision dealing with the meaning of those expressions. The contrary view taken in earlier Tribunal decisions was not accepted.

Conclusion: The Molybdenum wire was not a tool or appliance within the exclusion clause and was an eligible input for Modvat credit; the assessee succeeded on this issue.

Ratio Decidendi: A consumable item used only as a mandrel in the manufacturing process, which is wholly destroyed and has no independent functional role as a tool, appliance or machine, remains an input used in relation to manufacture and is not excluded from Modvat credit where the binding departmental circular supports that view.

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