MODVAT credit for BOPP separator films upheld as manufacturing inputs, not apparatus or appliances

BOPP films used as separators in the manufacture of decorative laminate sheets were treated as eligible MODVAT inputs under Rule 57A because they were used in the manufacturing process, lost their identity on use, and were partly consumed during lamination. The exclusion in the Explanation to Rule 57A, which applies to machinery, equipment, apparatus or appliances, did not cover a synthetic resin film used only as a separating medium. Prior treatment of the goods as qualifying for proforma credit under Rule 56A also supported their input status.

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Issues: Whether BOPP films used as separators in the manufacture of decorative laminate sheets were eligible inputs for MODVAT credit under Rule 57A of the Central Excise Rules, or were excluded as appliances or apparatus.

Analysis: The films were used in the manufacturing process and, on use, lost their identity and became partly consumed in the course of lamination. Rule 57A permits credit for inputs used in or in relation to manufacture, and the exclusion applies to machinery, equipment, apparatus or appliances. A film made of synthetic resin and used as a separating medium does not answer the description of apparatus or appliance. The prior allowance of proforma credit under Rule 56A also supported the view that the goods were manufacturing inputs, and the absence of challenge to that treatment reinforced the conclusion.

Conclusion: BOPP films were eligible inputs for MODVAT credit and were not hit by the exclusion in the Explanation to Rule 57A.

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