Modvat credit for cut-to-size gasket material used to maintain manufacturing plant was allowed under Rule 57Q.

Rubber sheet gaskets cut to size and used for maintenance of plant and machinery directly involved in manufacture were held eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944. The item was received as gasket material and, after being cut to the required size, was used to seal joints in plant used for manufacturing caustic soda. Functional use in maintaining manufacturing equipment brought the goods within the rule, following the same principle applied to material used after cutting for plant purposes. The disallowance was set aside in favour of the assessee.

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Issues: Whether rubber sheet gaskets, cut to size and used for maintenance of plant and machinery directly used in manufacture, were eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The item received in the factory was not disputed to be gasket material, and it was actually used for maintenance of plant directly involved in the manufacture of caustic soda. After being cut to the required size, the gasket sheets were used to seal joints of plant and machinery. The Tribunal treated the matter as covered by the same principle applied earlier to material used after cutting to size for plant purposes, and held that the functional use in maintaining manufacturing equipment brought the item within the scope of the rule.

Conclusion: The rubber sheet gaskets were eligible for Modvat credit under Rule 57Q, and the disallowance was set aside in favour of the assessee.

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