1997 (4) TMI 302 - AT - Central Excise

Revenue appeal dismissed, assessee cross objection disposed; coated abrasive paper not deemed a tool.

The appeal of the Revenue is dismissed based on the Division Bench judgment, and the cross objection filed by the assessee is disposed of. The coated ... Modvat credit - input under Rule 57A - exclusion clause in the Explanation to Rule 57A - tool - used in relation to the manufacture of the final product - binding precedent - Single Member bound by Division BenchTool - exclusion clause in the Explanation to Rule 57A - Coated abrasive paper (emeri paper) is not a 'tool' within the meaning of the exclusion in the Explanation to Rule 57A and therefore is not excluded from being treated as an input. - HELD THAT: - The Court found that coated abrasive paper merely smoothens or polishes plywood and does not shape it; it is not known in the market as a 'tool'. These characteristics distinguish it from items intended to be tools within the exclusion. Consequently, the exclusion clause in the Explanation to Rule 57A does not apply to coated abrasive paper, and it cannot be treated as excluded on the ground that it is a tool.Coated abrasive paper is not a tool and is not excluded from input treatment under the Explanation to Rule 57A.Modvat credit - used in relation to the manufacture of the final product - input under Rule 57A - Coated abrasive paper is used in relation to the manufacture of the final product (marketable plywood) and therefore qualifies as an input for the purpose of Modvat credit under Rule 57A. - HELD THAT: - The Court accepted the respondent's submission that marketable plywood would not come into existence unless plywood is polished. Polishing by coated abrasive paper is an integral step in producing the final, marketable product. On that basis, the Court held that coated abrasive paper is used in relation to manufacture and thus constitutes an input eligible for Modvat credit under the Rules.Coated abrasive paper is used in relation to the manufacture of marketable plywood and qualifies as an input for Modvat credit.Binding precedent - Single Member bound by Division Bench - A Single Member Bench is bound by an earlier Division Bench decision of the same zone in Jayashree Timber on the same issue. - HELD THAT: - The Court noted the existence of a Division Bench judgment of the zone on the identical question (Jayashree Timber) and, sitting as a Single Member, applied the principle of stare decisis binding the Single Member to that Division Bench precedent. That precedent supported the conclusion that coated abrasive paper is an input eligible for Modvat credit.The Single Member Bench applied the Division Bench precedent and followed its holdings in deciding the appeal.Final Conclusion: The Revenue's appeal is dismissed: coated abrasive (emeri) paper is not a tool excluded by the Explanation to Rule 57A, but is an input used in relation to the manufacture of marketable plywood and is therefore entitled to Modvat credit; the Single Member Bench followed the earlier Division Bench precedent and dismissed the appeal, disposing of the assessee's cross-objection. The issue in this case is whether coated abrasive paper is entitled to Modvat credit. The original authority denied the credit, but the lower appellate authority disagreed. The Tribunal's previous decisions support the lower appellate authority's stance. The coated abrasive paper is not considered a tool and is used in relation to the manufacture of the final product. The appeal of the Revenue is dismissed based on the Division Bench judgment, and the cross objection filed by the assessee is disposed of.