1997 (3) TMI 250 - AT - Central Excise

Appellate Tribunal allows Modvat credit for manufacturing inputs, including cutting blades and packaging materials.

The Appellate Tribunal CEGAT, New Delhi ruled in favor of the appellants, allowing Modvat credit for items like cutting blades and packaging materials, ... Modvat - Parts of machine - Manufacture Issues Involved: The issues involved in this case include the eligibility of certain items for Modvat credit under Rule 57A of the Central Excise Rules, specifically focusing on whether items like ring travellers, filter packs, cutting blades, G.I. stitch wires, Sodium Silicate Bopp Tape, and thermocole qualify as inputs for the purpose of claiming Modvat credit.Eligibility of Items for Modvat Credit:The appellants, engaged in manufacturing nylon and polyester filament yarn, had availed Modvat credit for duty paid on goods and articles used in the manufacturing process. The department issued show cause notices alleging that certain items like ring travellers, filter packs, and cutting blades, being parts of machines excluded from the definition of 'inputs,' were ineligible for Modvat credit. Similarly, G.I. stitch wires were considered ineligible as they were used in the manufacture of duty-exempt corrugated boxes. The appellants also claimed Sodium Silicate Bopp Tape and thermocole as packaging materials, but authorities held that these were not ready-to-use packaging materials and thus not eligible for Modvat credit.Arguments and References:The appellants argued that the items in question were replaceable parts or used for packaging purposes, citing precedents like the Union Carbide case and decisions by the High Court of Madras. The Departmental Representative contended that machinery items were excluded from the definition of inputs, and G.I. wires used for duty-exempt products were not eligible for Modvat credit. The appellants referenced judgments to support their claims regarding the eligibility of the items under consideration.Judicial Analysis and Decision:The Tribunal considered the precedents cited, including the Union Carbide case and the High Court of Madras judgment in Ponds India Ltd. The Tribunal noted that certain items like cutting blades and packaging materials fell within the scope of inputs as per the Larger Bench decision and the Madras High Court ruling. It rejected the contention that packaging materials must be ready-to-use articles, emphasizing that materials used in the manufacturing process also qualify as inputs. The Tribunal ruled in favor of the appellants, setting aside the previous order and allowing the appeal based on the eligibility of the items for Modvat credit.This summary highlights the key issues, arguments presented, judicial analysis, and the final decision of the Appellate Tribunal CEGAT, New Delhi regarding the eligibility of items for Modvat credit under Rule 57A of the Central Excise Rules.