1998 (7) TMI 251 - AT - Central Excise

Appellate Tribunal upholds Modvat credit eligibility for paper making items under Rule 57A

The Appellate Tribunal CEGAT, New Delhi rejected the Revenue's appeal and upheld the impugned order regarding the eligibility of Modvat credit for items ... Eligibility to MODVAT credit - inputs for credit under Rule 57A of the Central Excise Rules, 1944 - parts of machine exclusion under the explanation to Rule 57A - classification of felts, wire mesh and synthetic cloth as inputs - binding precedent of a Larger Bench upholding earlier Tribunal decisionEligibility to MODVAT credit - parts of machine exclusion under the explanation to Rule 57A - classification of felts, wire mesh and synthetic cloth as inputs - Whether dandy covers, dryer felt, press felt, industrial cloth and synthetic cloth used on the paper machine are eligible for Modvat credit and not excluded as parts of the machine under the explanation to Rule 57A of the Central Excise Rules, 1944. - HELD THAT: - The Department's contention that the listed items are parts of the paper machine and therefore excluded from inputs under the explanation to Rule 57A was considered and rejected. The Tribunal relied on its earlier decision in Straw Products Ltd. which held that items such as felt used in paper making are not excluded by the explanation to Rule 57A and are eligible for Modvat credit. That view was subsequently upheld by the Larger Bench in Union Carbide v. Collector of Central Excise, which affirmed that felts, wire mesh and synthetic cloth, although parts of machines, fall within the scope of inputs admissible for credit under Rule 57A. Applying the binding precedent of the Larger Bench, the impugned order allowing credit was sustained and the Revenue's appeal was dismissed.The items used on the paper machine are eligible for Modvat credit; the impugned order is upheld and the appeal is rejected.Final Conclusion: The appeal by the Revenue is dismissed; dandy covers, dryer felt, press felt, industrial cloth and synthetic cloth used on the paper machine are eligible for Modvat credit in view of the Tribunal's decision in Straw Products and the Larger Bench's affirmance in Union Carbide. The Appellate Tribunal CEGAT, New Delhi ruled on the eligibility of Modvat credit for items used in paper making. The Department argued that the items are parts of a paper machine and not eligible for credit. However, based on previous decisions, the Tribunal held that such items are eligible for credit under Rule 57A. The appeal by the Revenue was rejected, upholding the impugned order.