Modvat credit on filter pads and mesh in gelatine manufacture upheld where the materials were treated as eligible inputs.

Filter pads or mesh used in gelatine manufacture were treated as eligible inputs for Modvat credit under Rule 57A because materials such as wire mesh, wire cloth and felts, though used in the manufacturing process and periodically replaced, were regarded as parts of machinery and not covered by the exclusion in the Rule 57A explanation. The Tribunal followed the larger bench view approved by the Patna HC that a filtering function alone does not disqualify such materials from input status. On that reasoning, denial of Modvat credit was unsustainable.

---

---

Issues: Whether filter pads or mesh used in the manufacture of gelatine were eligible inputs for Modvat credit under Rule 57A of the Central Excise Rules.

Analysis: The Tribunal accepted the line of authority holding that wire mesh, wire cloth and felts used in manufacture were parts of machinery and did not fall within the exclusion clause in the explanation to Rule 57A. The reasoning followed the larger bench view approved by the Patna High Court that such materials, though used in the manufacturing process and replaced periodically, remained eligible inputs and were not excluded merely because they performed a filtering function.

Conclusion: Filter pads or mesh used in the manufacture of gelatine were held to be eligible inputs, and the denial of Modvat credit was unsustainable.

Ratio Decidendi: Materials used in the manufacturing process that function as parts of machinery and are not specifically excluded by the explanation to Rule 57A remain eligible inputs for Modvat credit.

---