1998 (1) TMI 156 - AT - Central Excise

Modvat Credit Eligibility for Consumable Tools: Tribunal Grants Relief

The appeal before the Tribunal centered on the eligibility of Modvat credit for duty paid on goods classified as 'consumable tools.' The appellant argued ... Modvat - `Consumable tools’ Issues:Eligibility for Modvat credit on duty paid for consumable tools.Detailed Analysis:The appeal before the Appellate Tribunal CEGAT, Mumbai involved the eligibility of Modvat credit on duty paid for goods classified as 'consumable tools.' The appellant initially took credit for the duty paid on these goods but later reversed the credit in the RG 23 Account following an objection by the Superintendent. The appellant then filed a claim for a refund, arguing that the manufacturer reversed the credit under coercion and that the goods did not qualify as tools. The Assistant Collector and the Collector (Appeals) rejected these contentions, leading to the appeal before the Tribunal.The appellant's advocate argued that the goods in question should not be excluded from being considered as inputs since they cannot be used independently but only after being fitted into other goods. He relied on a previous decision by the Tribunal in Collector of Central Excise, Bolpur v. Durgapur Cement Works to support this argument.On the other hand, the departmental representative contended that the goods were commercially and technically recognized as tools and were essential for processing the inputs in question. He highlighted that tools are generally excluded from the category of inputs, and goods used in conjunction with tools would also fall under this exclusion. Additionally, he raised concerns about the lack of clarity regarding the nature and scope of the goods in question.The appellant's advocate clarified that the appeal specifically pertained to goods that needed to be fitted into tools for frequent replacement, such as drilling bits and cutting blades. These goods, which fall under Heading 8207.00 of the Tariff, cannot function independently and require integration into machines to be operational. The exclusion clause in the Explanation to Rule 57G excludes tools or appliances used for processing or producing goods, emphasizing that only tools incapable of independently producing or processing goods are excluded.The Tribunal referenced a previous case, Union Carbide India v. Collector of Central Excise, Calcutta, to distinguish between parts of machines and tools. It was established that parts of machines were not excluded goods, unlike complete machines or machinery. In this case, the goods in question, such as drills, were considered tools but fell under the excluded category due to their inability to function independently in producing or processing goods.Ultimately, the Tribunal allowed the appeal, granting consequential relief to the appellant based on the arguments presented regarding the classification and eligibility of the goods in question for Modvat credit.