1989 (10) TMI 147 - AT - Central Excise

Tribunal upholds decision on MODVAT credit eligibility for Diaphragms and Air Bags under Rule 57A

The Tribunal dismissed the appeal challenging the Collector of Central Excise (Appeals), Madras' decision on the eligibility of Diaphragms and Air Bags ... MODVAT Credit Issues:1. Eligibility of Diaphragms and Air Bags for MODVAT credit under Rule 57A.Analysis:The appeal in this case challenges the decision of the Collector of Central Excise (Appeals), Madras, regarding the eligibility of Diaphragms and Air Bags for MODVAT credit under Rule 57A. The key question is whether these items, used in the appellants' factory for shaping tires, can be considered as tools and appliances excluded from MODVAT credit. The lower authorities held that since these items are used for giving shape to tires, they qualify as tools and appliances excluded under Rule 57A.The representative of the appellants argued that Diaphragms and Air Bags should be treated as consumables used in tire manufacturing. He contended that these items are capable of limited repetitive use before being discarded, making them consumables. He highlighted a previous order from the Collector of Central Excise (Appeals), New Delhi, where a similar manufacturer received benefit under Notification 217/86 for using items in the manufacture of finished products within the factory.On the other hand, the Departmental Representative argued that these items are akin to equipment used to bring about changes in tires during the manufacturing process, thus falling under the excluded category of Rule 57A and Notification 217/86. He pointed out that the appellants should have considered utilizing the proviso to Rule 9 for removing excisable goods without payment of duty if consumed within the manufacturing premises.The Tribunal analyzed whether Diaphragms and Air Bags can be considered as inputs for MODVAT credit or exemption under Notification 217/86 or Rule 57A. It was noted that these items are captively consumed and discarded after use, raising the question of their classification as consumables. The term 'consume' was defined, and it was observed that these items, used in conjunction with molds, collectively shape the tires, constituting one apparatus. Considering the function of these items at the green stage of tire production, they were deemed equipment bringing about changes in the final product's manufacturing process, thus falling under the excluded category of Rule 57A and Notification 217/86.The Tribunal emphasized that the previous order cited by the appellants did not address the specific exclusions under Notification 217/86 concerning the appellants' goods. Consequently, the appeal was dismissed as the items were excluded from benefiting under the mentioned provisions.