Modvat credit on release paper upheld where it operated as a transfer medium, not machinery, in artificial leather manufacture.

Modvat credit was held admissible on release paper used in manufacturing artificial leather cloth because the paper functioned as a transfer medium for plastisol and not as part of machinery. On that basis, the Tribunal upheld the credit claim and rejected the Collector's reference application.

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Issues: Whether release paper used in the manufacture of artificial leather cloth was an eligible input for Modvat credit under Rule 57A, or whether its repeated use and function as a carrier made it an appliance or part of machinery hit by the explanation to that rule.

Analysis: The release paper was found to function only as a medium for transferring plastisol and ensuring uniform finish in the final product. On the factual position, it could not be treated as part of the machinery like a conveyor or carrier belt. Mere repeated use did not alter its character into an appliance or machinery item. Since it remained paper and was used in or in relation to manufacture, it did not fall within the exclusion in the explanation to Rule 57A.

Conclusion: The release paper was eligible for Modvat credit as an input and was not hit by the explanation to Rule 57A.

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