Modvat credit on silica coated release paper allowed where it was used in manufacture and not treated as appliance or equipment.

Silica coated release paper used in lamination was treated as an eligible input for Modvat credit under Rule 57A because an input need only be used in relation to manufacture, not form an integral part of the final product. The department produced no material showing that the paper was regarded as an appliance or equipment in technical or commercial parlance, and its treatment as paper for customs purposes did not trigger the exclusion clause. On that reasoning, the release paper was not within the excluded category and the credit claim was upheld on merits.

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Issues: Whether silica coated release paper used in the lamination process qualified as an input for Modvat credit under Rule 57A and was not excluded as an appliance or equipment.

Analysis: The Bench noted that an input need not form an integral part of the final product if it is used in relation to manufacture. On the record, the department produced no material to show that silica coated release paper was regarded as an appliance or equipment in technical or commercial parlance. The paper was treated as paper for customs purposes, and the exclusion clause could not be attracted on that basis alone. Following the earlier Tribunal view on the meaning of appliance or equipment, the Bench held that the release paper did not fall within the excluded category.

Conclusion: The release paper was an eligible input and Modvat credit was correctly availed; the challenge on merits failed.

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