Collector of Central Excise vs Rollatainers Ltd.

Ashutosh Mohunta, J.—The Customs, Excise and Gold (Control), Appellate Tribunal has referred the following substantial question of law for adjudication by this Court:

Whether the Appellate Tribunal, after having found that Felts, Metal cloth, Phosphor Bronze, Wire cloth, Wire mesh and Dandy cloth are parts of machine and used in relation to the manufacture of specified final products, is correct in holding that these parts of machine are not excluded from the definition of "input" by exclusion Clause (i) of the Explanation to Rule 57A of the Central Excise Rules, 1944 and if so, is correct in holding that assessees are entitled to Modvat credit in respect of duty of Central excise paid on such goods?

The provisions of Rule 57A granting incentive to the manufacturer was inserted in order to expend the business premises in India. The combined reading of this provision would reveal that the manufacturer is entitled to claim the Modvat credit on such finished excisable goods as the Central Government may notify and the credit of specified duty under this section shall be allowed on the inputs used in the manufacture of final products as well as on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. According to Section 57B, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the inputs used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final products or not, namely, (i) the inputs, which are manufactured and used within the factory of production, but according to Section 57B(2), the manufacturer of the final products shall not be allowed to take credit of the duty paid on machines, machinery, equipment, apparatus, tools, appliances or capital goods.

It means, the assessee is entitled to avail the Modvat credit on the inputs/material used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not.

In Collector of Central Excise, Bangalore Vs. Escorts Mahle Ltd., , the Hon''ble Supreme Court has held that the material used in the manufacture of final products would be eligible Modvat credit being an input.

The manufacture of paper and paper board are covered under exclusion Clause 57A of the Act. In fact, in Escorts Mahle Ltd.''s case (supra), even parts of machinery would be eligible for Modvat credit. In case of Collector of Central Excise Vs. Zenith Papers, a Division Bench of this Court held that use of wire mesh and felts are to be inputs and assessee is entitled to claim Modvat credit. Similar view was taken by a Division Bench of this Court in case of CCE v. Sukhna Paper Milk 2002 (82) ECC 469.

In view of the above, we are of the considered view that use of Felts, Metal cloth, Phosphor Bronze, Wire cloth, Wire mesh and Dandy cloth would be entitled to Modvat credit when used in manufacture of final products. Resultantly, the Question posed is answered in favour of the assessee and against the revenue.