2010 (3) TMI 152 - HC - Central Excise

Cenvat / Modvat Credit - Whether wire Mesh and Felt Cloth used in the manufacture of Paper and Paper Board are entitled for the benefit of MODVAT Credit under Rule 57A of the Central Excise Rules as input being parts of the machine Machinery Plant Equipment and Tools which are covered under exclusion clause 57A of the Central Excise Rules? Held that 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. - The above said items/inputs part of the machinery equipment and tools are covered under exclusion clause 57A of the Act. - that use of wire mesh and felt are to be inputs and assessee is entitled to claim modvat credit

Summary

Issues:
Whether wire Mesh and Felt Cloth used in the manufacture of Paper and Paper Board are entitled for the benefit of MODVAT Credit under Rule 57A of the Central Excise Rules as input being parts of the machine, Machinery, Plant, Equipment and Tools which are covered under exclusion clause 57A of the Central Excise Rules?

Analysis:
The judgment discusses the entitlement of MODVAT Credit for wire mesh and felt cloth used in the manufacture of paper and paper board under Rule 57A of the Central Excise Rules. The provision of Rule 57-A aims to provide incentives to manufacturers for expanding business premises in India. It allows manufacturers to claim modvat credit on specified duty for inputs used in the manufacture of final products, whether directly or indirectly. Section 57B further elaborates on the credit allowed for inputs used in or in relation to the manufacture of final products, excluding duty paid on machines, machinery, equipment, etc. The judgment cites the case of Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd., where the Supreme Court held that materials used in the manufacture of final products are eligible for modvat credit as inputs.

The judgment refers to previous cases like Collector of Central Excise v. Zenith Papers and Commissioner of Central Excise v. Sukhna Paper Mills, where wire mesh and felt were considered inputs eligible for modvat credit. It emphasizes that items like wire mesh and felt cloth, being part of machinery, equipment, and tools, fall under the exclusion clause 57A of the Act. Therefore, the court concludes that the use of wire mesh and felts in the manufacture of final products entitles the assessee to modvat credit. Consequently, the judgment answers the question posed in favor of the assessee and against the revenue.

In conclusion, the judgment clarifies the eligibility of wire mesh and felt cloth for MODVAT Credit under Rule 57A of the Central Excise Rules, emphasizing their role as inputs in the manufacturing process. The decision aligns with previous rulings and statutory provisions, ensuring manufacturers can claim credit for specified duty on materials used in or in relation to the production of final goods.