1997 (1) TMI 206 - AT - Central Excise

Appellate Tribunal: Modvat credit allowed for aluminium strips used in manufacturing caps for GLS lamps

The Appellate Tribunal CEGAT, New Delhi held that the appellants were entitled to Modvat credit for aluminium strips used in manufacturing caps for GLS ... Modvat Issues:Eligibility of Modvat credit for aluminium strips used in the manufacture of aluminium caps, which are further used in the manufacture of GLS lamps above 60 volts.Detailed Analysis:1. Eligibility of Modvat Credit:The primary issue in this appeal before the Appellate Tribunal CEGAT, New Delhi was the eligibility of Modvat credit for aluminium strips used as inputs in the production of aluminium caps, which were then utilized in the manufacturing process of GLS lamps above 60 volts. The department disallowed a specific sum of credit on the basis that the caps were considered final products exempt from duty under Notification 217/86. However, it was established that the GLS lamps above 60 volts, for which the caps were used, were indeed subject to duty upon clearance by the appellants.2. Manufactured Items and Dispute Clarification:The appellants were engaged in the manufacturing of GLS lamps falling into two categories: those below 60 volts, cleared duty-free, and those above 60 volts, attracting duty upon clearance. Additionally, the appellants produced caps that were used in both types of lamps and also sold independently in the market. The declaration filed by the appellants clearly indicated the use of aluminium strips as inputs for GLS lamps and caps as inputs for electric bulbs above 60 volts. The department's contention that the caps were final products was refuted based on precedents highlighting that products used for captive consumption in the manufacturing process of other goods are considered intermediate products rather than final products.3. Precedents and Determination of Final Products:The Tribunal referred to previous decisions such as Collector of Central Excise v. Indian Aluminium Co, Collector of Central Excise v. Apar Ltd., and Gramophone Company of India v. Collector of Central Excise, Calcutta to establish that the classification of products as intermediate or final is context-specific and depends on the manufacturing stages within the factory. The fact that some caps were sold independently did not alter the classification, especially when the final GLS lamps above 60 volts were dutiable products. The argument that the combined account maintained by the appellants made it difficult to ascertain the admissible credit amount was dismissed, as this very account was used by the authorities to disallow the credit.4. Judgment and Conclusion:After thorough analysis and considering the Tribunal's previous decisions, the presiding judge, Ms. Jyoti Balasundaram, concluded that the appellants were indeed entitled to the Modvat credit for the aluminium strips used in the production of caps consumed in the manufacturing of GLS lamps above 60 volts. The impugned order disallowing the credit was set aside, and the appeal was allowed, with any consequential relief due to the appellants to be granted accordingly.