1989 (3) TMI 267 - AT - Central Excise

Interleaving Kraft Paper Not Eligible for MODVAT Credit under Rule 57A

The Tribunal ruled that inter leaving kraft paper used in the manufacturing of stainless steel sheets and coils does not qualify as an input for MODVAT ... MODVAT Credit Issues:1. Eligibility of inter leaving kraft paper for MODVAT credit under Rule 57A.2. Determination of whether inter leaving kraft paper qualifies as an input in the manufacture of stainless steel sheets and coils.Analysis:1. The appeal was filed by the Collector of Central Excise, Coimbatore, challenging the order passed by the Collector of Central Excise (Appeals), Madras, which allowed MODVAT credit for inter leaving kraft paper used in the manufacture of stainless steel sheets. The Assistant Collector had initially denied the credit, but the Collector (Appeals) overturned this decision, stating that the inter leaving kraft paper qualifies as an input under Rule 57A related to goods used in the manufacture of finished products.2. The respondents purchased inter leaving kraft paper for the purpose of preventing scratches and oil absorption during the manufacturing process of stainless steel sheets and coils. The paper was reused in the manufacturing process. The Assistant Collector's view was that the paper was not essential for the manufacture of stainless steel sheets and coils and thus not eligible for MODVAT credit. However, the Collector (Appeals) held that the inter leaving kraft paper falls within the ambit of Rule 57A as a material used in or in relation to the manufacture of the finished products.3. The Department's contention was that the inter leaving kraft paper is not directly related to the manufacturing process of stainless steel sheets and coils, as it is used for protection against scratches during coiling and recoiling, which they argued is not an essential part of the manufacturing process. The learned S.D.R. pointed out that such usage does not qualify for MODVAT credit under Rule 57A.4. The Tribunal, after considering the arguments and evidence presented, concluded that the inter leaving kraft paper does not meet the criteria to be considered an input for MODVAT credit under Rule 57A. The paper was deemed more akin to equipment or an appliance used in the manufacturing process to prevent scratches or oil absorption, which falls outside the definition of 'input' as per the explanation to Rule 57A. Therefore, the impugned order was set aside, and the appeal by the Collector of Central Excise was allowed.