TMI Blog2012 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... d belt, which is passed through oven. After processing in the oven, Heritage Flakes is manufactured and released from the belt. The Teflon coating on the belt not only helps in release of heritage flakes because of its non-stick property but also makes flakes surface even and imparts finish. During the course of manufacture, the coating gets consumed and has to be replaced after approximately 5 mts. of manufacture of heritage flakes. According to learned counsel for the assessees, the belt is a part of the machinery used for the manufacture of heritage flake and it participates in the process of manufacture of final product (heritage flakes) as it facilitates release of the finished product after its formation and is, therefore, entitled to credit in the light of the decision of the Larger Bench of the Tribunal in Union Carbide India Ltd. v. Collector of Central Excise, Calcutta-I [1996 (86) E.L.T. 613 (Tribunal)] wherein the Tribunal has held that woollen felts used in the paper mills are also eligible to the benefit of Modvat credit. On the other hand, the contention of the Revenue is that the disputed item only provides a medium for transportation of the materials and does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fabric (whether or not coated, covered or laminated with any other material) woven from strips or tapes of plastics. 5. We are of the view that the goods in question certainly participate in the manufacturing process by providing a non-stick and heat resistant smooth surface whereby the final product heritage flakes (involving conversion of china clay/mud/sand into flakes of desired colours and textures by mixing with pigments, binders etc., and poured in semi-solid form/spread to the desired thickness of 150-200 Microns over Teflon Coated Glass Fabric Belts ) can come into existence. The final product cannot be manufactured without using the goods in this manner. The function performed by the disputed item is comparable to the function of goods (felts, wire mesh etc.,) held to be inputs in the Union Carbide decision cited supra which has been followed subsequently by the Patna High Court in Collector of Central Excise, Patna v. Tata Engineering Locomotive Co. Ltd. [1999 (111) E.L.T. 9 (Pat.)] to extend credit on endless wire mesh and industrial cloth used in the manufacture of paper, by the Gujarat High Court in Commissioner of Central Excise v. Botliboi Co Ltd. [2010 (25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e moving felt carries the pulp web to the drier and is calendered or pressed being wound on rolls and treated further. Wet paper is passed between Dandy Rolls covered with Dandy cover so as to smoothen the surface of the paper. These articles are damaged in the process and require replacement periodically. They are replaceable goods used in the paper making machine in the course of manufacture of paper. They can be regarded in a way, as parts of the paper making machine or machinery used in the machine or for the purpose of the machine; but by their very purpose, they are goods used in relation to the manufacture of paper or paper products and hence are inputs as contemplated in Rule 57A. 7. In the present case, the semi-solid treated clay/sand mixture is spread on the subject goods in the same manner as the paper pulp with excess water is placed on the wire-mesh which, along with wet pulp moves in the paper-making machine and then the pulp is transferred to felt, which moves with the wet pulp (with the water partially drained) and the felt moves into the drier and further process takes place. The use of the wire mesh and the felt is identical to the function of Teflon Coate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), the benefit cannot be given. In the present case, the belt only provides the function of carriage of the goods and cannot be taken to be participating in the manufacturing process. The plea of the appellants that the function performed by the belt in question is like that of release paper cannot be accepted as the belt is used not for its release function for use of carriage of material and its surface has been made smooth and non-sticky by use of teflon only to ensure use of carrier functions and to enable repetitive use. In the above background we dismiss the appeals. 13. These appeals have been heard afresh as the Hon ble Madras High Court has quashed the Tribunal s order dated 12-3-1997 and has remanded the matter for fresh consideration with the following observations :- 7. The core issue to be decided is as to whether teflon coated glass fabric belt used in the manufacturing process could be treated as input in relation to the manufacture of final product within the meaning of Rule 57A of the Central Excise Rules, 1944. 8. The appellate authority found that there were two conflicting views regarding inputs in relation to the manufacturing process. The East ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the CEGAT. Therefore, we are of the view that the matter requires fresh consideration by the CEGAT. 14. As directed by the Hon ble High Court in paragraphs 11 and 12 of its order, the Tribunal needs to consider the subsequent judgments with respect to the definition in relation to the manufacture for the purpose of deciding as to whether the impugned goods can be treated as an eligible input for Modvat credit, and in particular, the Hon ble Supreme Court s judgment in the case of Escorts Mahle (cited supra). As stated above, the decision of the Larger Bench of the Tribunal in the case of Union Carbide (cited supra) was already considered by the Tribunal while rendering the earlier order dated 12-3-1997. 15. In the case of Escorts Mahle (cited supra), the Hon ble Supreme Court has referred to the process of electric furnace steel making and has come to the conclusion that ramming mass etc. involved in that case were essential to control vapours generated during steel manufacturing process and has allowed Modvat credit on ramming mass etc. as use of special chemicals were essential for the manufacturing process. 16. In the case of Maruti Suzuki Ltd. v. C.C.E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly a carrier of goods. He has further stated that for instance if any finished goods are carried through a pipe which is quoted with a special chemical, the pipe itself cannot become an input used in the manufacture or in relation to the manufacture as it essentially performs the function of a carrier. 19. I also find that Ramming mass used in steel manufacture and wire mesh and felt used in paper manufacturing, which have been the subject-matter of some of the cases where Modvat credit has been allowed are not analogous to the impugned Teflon coated belt in question. As stated above, the Hon ble Supreme Court noticed that the ramming mass etc. were essential to the manufacture of steel for controlling acidic vapours. In the case of paper making, the wire mesh and felt play an important role in the process of manufacture of paper which involves removing the water from the web of wet pulp before it is formed into a sheet of paper and dried. On the other hand, the concurrent findings by the original and lower appellate authority clearly show that the impugned Teflon coated belt is merely used as a carrier and it does not participate in the manufacturing process. Its role is more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( Heritage Flakes ) during the period of dispute (February, 1992 to September, 1994) can be brought within the ambit of Rule 57A of the Central Excise Rules, 1944 as this rule stood during the said period. The full text of this rule has been reproduced in para-4 of the order recorded by the learned Vice-President. As per this provision, Modvat credit of the duty paid on the goods used in, or in relation to, the manufacture of final products was available to the manufacturer of the final products for utilizing towards payment of duty on the final products. The goods used in, or in relation to, the manufacture of the final products were referred to as the inputs . 22. The use of Teflon-Coated Glass Fabric Belt has also been stated in the order recorded by the learned Vice-President and the same need not be repeated here. It appears that the belt was used in relation to the manufacture of Heritage Flakes (final product) and this fact is not in dispute. The limited case of the Revenue is that the belt was in the excluded category of items mentioned in Explanation to sub-rule (1) of Rule 57A and, therefore, it could not be accepted as an input for the purpose of Modvat credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Teflon-Coated Glass Fabric Belt having been used for conveying the processed raw material (paste of treated clay) through the oven could appropriately be considered as a tool or appliance used for processing of any goods or for bringing about any change in any substance in, or in relation to, the manufacture of the final product and consequently it would get covered in the excluded category mentioned in the Explanation to sub-rule (1) of Rule 57A. He points out that, admittedly, the Teflon coating or any other part of the belt did not enter into the final product or otherwise participate in the process of its manufacture. In this view, according to the ld. SDR, the Teflon-coated belt would certainly remain outside the ambit of Rule 57A. 25. I have given careful consideration to the submissions. The manner of use of Teflon-Coated Glass Fabric Belt is not in dispute. Para-3 of the order recorded by the ld. Vice-President contains a brief account of its use and there is no dispute in this regard. Therefore, Teflon-coated belt was, undisputedly and indisputably, used by the assessee in, or in relation to, the manufacture of Heritage Flakes . It fell within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whether a part of machinery could also be included in the exclusion clause of Rule 57A(1) whereas the East Regional Bench had considered this question as well. While appreciating the approach of the lower appellate authority, I am constrained to hold that its decision cannot be upheld inasmuch as the view taken by the East Regional Bench of the Tribunal in the case of Straw Products (vide supra) was approved by the Larger Bench in Union Carbide case vide para-18 of the judgment of the Larger Bench and the Larger Bench decision was upheld by the Hon ble Patna High Court in TELCO case. It is also pertinent to note that the decision of the South Regional Bench in the case of AP Paper Mills Ltd. was overruled by the Larger Bench. Para-18 of the Larger Bench judgment contains the ratio of its decision with regard to items like felt, stainless steel wire mesh etc. used in relation to the manufacture of paper and the same is reproduced below :- 18.(i) Felt, Phosphor Bronze, stainless steel wire mesh, lin cloth, Dandy cloth etc.: Pulp with excess water comes from the pulp making machine to the paper making machine. Pulp is allowed to fall on phosphor bronze or stainless ste ..... X X X X Extracts X X X X X X X X Extracts X X X X
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