COLLECTOR OF C EX Vs. RESCH EXTRUSION TECHNIC I LTD

JUDGEMENT

(1.) THIS appeal has been preferred by the Collector of Central Excise, Coimbatore, against the order dated 30-6-1987 passed by the Collector of Central Excise (Appeals), Madras by which he had upheld the order of the Assistant Collector of Central Excise, Hosur Division, dated 18-12-1986 holding that the plastic granules used for testing the machine manufactured by the respondents for making layflat tubings will be eligible for MODVAT credit under Rule 57A of the Central Excise Rules as inputs used in or in relation to manufacture of the finished product.

(2.) The respondents manufacture various types of plastic processing machines for producing layflat tubings out of LDPE/HDPE granules. After the machine is manufactured, but before their clearance the respondents have to test the machine which could be done only by feeding LDPE/HDPE granules to see whether the film is correctly coming out or not and any defect discovered or rectified and then only the machine is cleared. They addressed a letter to the Department on 1 -12-1986 requesting that they may be permitted to utilise the credit of duty paid on the plastic raw materials used for testing the machines for payment of duty on the finished machine under Rule 57A of the Central Excise Rules relating to MODVAT credit. The Assistant Collector held that they were eligible to utilise the credit for paying duty on the extrusion machines. This decision was challenged by the Department before the Collector (Appeals) by filing an application under Section 35E(4) of the Central Excises and Salt Act, 1944. The Collector (Appeals) agreed with the Assistant Collector and rejected the Department's application for review. Being aggrieved by the above order of the Collector (Appeals), the Collector of Central Excise, Coimbatore, has filed the present appeal.

(3.) SHRI Subash Chandra, Director of the respondent firm, on the other hand, contended that the terminology of Rule 57A is to the effect that materials used in or in relation to the manufacture of the final product would be eligible for MODVAT credit, and it is wide enough to cover the plastic granules used for testing the machines manufactured by them. The plastic granules are used to test the dye which goes into the machine to see whether it is according to specification.