Modvat credit eligibility for polyester film turns on whether the material is partly consumed and loses its identity in manufacture.

Polyester film used in manufacturing conveyor belts was treated as an eligible input for Modvat credit because it was partly consumed in the process, lost its identity, and functioned only to prevent sticking and produce a smooth surface. Applying the test for admissible inputs, the material was held not to fall within the excluded categories of machines, plant, equipment, apparatus, tools or appliances, and credit was therefore admissible.

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Issues: Whether polyester film used in the manufacture of conveyor belts qualified as an input eligible for Modvat credit under Rule 57A of the Central Excise Rules, 1944, or was excluded as an apparatus, appliance, or similar item.

Analysis: The film was used in the manufacturing process between calender plates and conveyor belts to prevent sticking and to produce a smooth surface. The earlier view that Tribunal decisions were only in personam was rejected. The use of the film was found to be analogous to BOPP films considered in earlier Tribunal decisions, where such films were treated as getting partly consumed in manufacture and losing their identity. On that reasoning, the film satisfied the test of an input and did not fall within the excluded category of machines, plant, equipment, apparatus, tools, or appliances. The material also met the recognised tests for admissibility of Modvat credit.

Conclusion: Polyester film used in the manufacture of conveyor belts was held to be an eligible input, and Modvat credit was admissible.

Ratio Decidendi: A material used in the manufacturing process that is partly consumed, loses its identity, and does not answer to the description of apparatus, equipment, or appliance qualifies as an input for Modvat credit if it is not covered by the excluded categories.

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