Modvat credit for coated abrasive used in plywood polishing allowed because exclusion clause covers complete machines, not replacement parts.

Coated abrasive used for polishing plywood was treated as an eligible Modvat input under Rule 57A because the exclusion clause was read as covering self-contained complete machines or similar complete goods, not mere parts or accessories used in manufacture and requiring replacement. Earlier rulings that coated paper was not a tool or item within the exclusion clause were followed, and the Larger Bench view in Union Carbide was applied to reject an implied extension of the exclusion to parts or accessories of excluded items. The Revenue's appeals were rejected, and credit was allowed.

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Issues: Whether aloxide paper or coated abrasive used for polishing plywood is an eligible input for Modvat credit under Rule 57A, or whether it falls within the exclusion clause as a part of an excluded machine or item.

Analysis: The Tribunal noted earlier decisions holding that coated paper was not a tool or other item covered by the exclusion clause, and relied on the Larger Bench ruling in Union Carbide, which held that the exclusion clause applies to self-contained complete machines or similar complete goods, not to mere parts or accessories used in manufacture and requiring replacement. On that reasoning, parts or accessories of excluded items were not treated as included within the exclusion clause by implication.

Conclusion: Coated abrasive used for polishing plywood was held to be an eligible input and not excluded by Rule 57A. The Revenue's appeals were rejected.

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