Graphite jigs as appliances under Modvat exclusion; credit denied for items used operationally in diode manufacture.

Graphite jigs used in diode manufacture were treated as fully finished articles performing an operational role in holding and positioning the assembly during fusion of leads, so they could be regarded as appliances or tools rather than mere graphite plates. Chapter 38 classification did not determine whether the item fell within the exclusion for machinery, apparatus or appliances under the Modvat scheme, and limited usable life did not exclude that character. On that basis, the jigs were held to fall within the exclusion clause and Modvat credit was not admissible.

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Issues: Whether graphite jigs used in the manufacture of diodes fell within the exclusion clause in the Explanation to Rule 57A of the Central Excise Rules so as to disentitle the assessee to Modvat credit.

Analysis: The jigs were found to be fully finished articles used in pairs to hold and position the assembly while heat was applied to fuse the leads to the capsule. Their function was not confined to being mere graphite plates; they performed an operational role in the manufacturing process and could properly be regarded as an appliance or tool. Classification under Chapter 38 did not control the question whether the item was machinery, apparatus or an appliance for the purposes of the exclusion clause. The fact that the jigs had a limited usable life also did not take them out of the category of machinery or appliances, since every such item has a finite life.

Conclusion: The graphite jigs were covered by the exclusion clause and Modvat credit was not admissible.

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