Modvat credit on tundish nozzles allowed where the items were used in manufacturing and not covered by the statutory exclusion.

Tundish nozzles used to transfer molten metal during manufacture were treated as eligible inputs for Modvat credit under Rule 57A. The Tribunal followed the later coordinate Bench view, read with the Larger Bench ruling on the Explanation to Rule 57A, that parts of machinery are not excluded merely because they are not consumables unless they fall within the statutory exclusion. As the nozzles were used in the manufacturing process and did not fall within that exclusion, credit could not be denied. The disallowance of Modvat credit on the nozzles was therefore unsustainable, and relief was available to the assessee for that item.

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Issues: Whether tundish nozzles used for transferring molten metal during manufacture were eligible inputs for Modvat credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: The Tribunal considered earlier decisions on the scope of the Explanation to Rule 57A. It noted that one line of authority had treated nozzles as falling within the excluded category, while a later coordinate Bench, relying on the Larger Bench ruling on the exclusion clause, had held that parts of machinery were not covered by that exclusion and could qualify as inputs. Following the later view, the Tribunal accepted that the nozzles were used in the manufacturing process for transferring molten metal from one stage to another and therefore answered the eligibility question in the assessee's favour.

Conclusion: The tundish nozzles were eligible inputs for Modvat credit under Rule 57A of the Central Excise Rules, 1944.

Final Conclusion: The denial of Modvat credit on the nozzles was unsustainable and the assessee was entitled to relief in respect of that item.

Ratio Decidendi: Articles or components used in the manufacturing process are not denied Modvat credit merely because they are not consumables, where they do not fall within the statutory exclusion under the relevant explanation to the credit rule.

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