Modvat credit and exemption for machinery parts allowed where exclusion for complete machines or units does not cover parts.

CEGAT, New Delhi held that rough rolls and parts of machinery falling within the description of inputs were eligible for Modvat credit and exemption benefits. It applied earlier precedent to uphold Notification No. 281/86, construed the exclusion for complete machines or units as not extending to parts thereof, and followed the Larger Bench view that such parts qualified under Notification No. 217/86. The Tribunal also accepted that Notification No. 67/95 applied from 16-03-1995. On that basis, the respondent was entitled to the notified benefits and the Revenue's appeal failed.

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Issues: Whether Modvat credit on rough rolls was admissible and whether the benefit of Notifications No. 281/86, 217/86 and 67/95 was available to the respondent.

Analysis: The Tribunal noted that the Commissioner (Appeals) had granted the benefit of Notification No. 281/86 following earlier precedent. It further found that the expression excluding complete machines or units did not extend to parts thereof. Relying on the Larger Bench ruling, the Tribunal held that parts of machinery falling within the description of inputs were eligible for exemption under Notification No. 217/86, and that the benefit of Notification No. 67/95 was also available from 16-03-1995.

Conclusion: The respondent was entitled to the benefit of the notifications and the Revenue's appeal was rejected.

Ratio Decidendi: An exclusion clause referring to complete machines or units does not cover parts of machinery, and such parts are eligible for the benefit of the relevant exemption notifications when otherwise falling within the prescribed description of inputs.

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