Modvat credit on inputs and machinery parts: polishing bricks allowed, while saw blades and related items were excluded.

Modvat credit was held admissible on polishing bricks used to manufacture polished granite because the final product could not be made without them and they directly produced the polish on the granite, so they were treated as necessary inputs outside the exclusion in Explanation (i) to Rule 57A. Credit was disallowed on circular saw blades, saw blade segments, diamond ring blades, diamond arc blades, levelling segments and milling cutters because they were treated as tools, machinery-related items, or parts of machinery falling within the excluded category. The appeal therefore resulted in credit being allowed only for polishing bricks and denied for the remaining six items.

---

---

Issues: (i) Whether Modvat credit was admissible on polishing bricks used in the manufacture of polished granite; (ii) Whether Modvat credit was admissible on circular saw blades, segments of saw blades, diamond ring blades for levelling, diamond arc blades for levelling, segments of levelling and milling cutter.

Issue (i): Whether Modvat credit was admissible on polishing bricks used in the manufacture of polished granite.

Analysis: Polished granite could not be manufactured without polishing bricks, and the polish on the final product was obtained from them. On that basis, they were treated as necessary inputs and not as items falling within the excluded category in Explanation (i) to Rule 57A.

Conclusion: Modvat credit on polishing bricks was allowed, in favour of the assessee.

Issue (ii): Whether Modvat credit was admissible on circular saw blades, segments of saw blades, diamond ring blades for levelling, diamond arc blades for levelling, segments of levelling and milling cutter.

Analysis: These items were treated as tools, vital parts of tools, or machinery-related items. The excluded expression in Explanation (i) to Rule 57A was read broadly to include machinery, and the word machinery was held to encompass parts of machinery as well.

Conclusion: Modvat credit on the remaining six items was disallowed, in favour of the Revenue.

Final Conclusion: The appeal was disposed of by granting Modvat credit only on polishing bricks and denying it on the remaining six inputs.

Ratio Decidendi: Under Rule 57A, items that are necessary inputs in the manufacture of the final product are admissible, but tools, machinery, and parts of machinery fall within the excluded category for Modvat credit.

---