COLLECTOR OF C EX Vs. STEEL AUTHORITY OF INDIA

JUDGEMENT

(1.) THIS appeal has been filed by the Collector of Central Excise, Coimbatore, against the order dated 26-10-1987 passed by the Collector of Central Excise (Appeals), Madras by which he had held that inter leaving kraft paper used in the manufacture of Stainless Steel sheets is eligible for MOD-VAT credit under Rule 57A and had set aside the order of the Assistant Collector denying such credit and allowed the appeal.

(2.) The respondents herein purchased inter leaving kraft paper on payment of duty and the material was used by them in the manufacture of stainless steel sheets and coils. It was important for the respondents to avoid scratches and steel formation during coiling and uncoiling and to avoid oil absorption from the surface of the stainless steel sheets. For this reason, the manufacturer used inter leaving kraft paper. This inter leaving paper is taken out after use in one processing and is used again. The respondents claim that this inter leaving paper was an input for the manufacture of stainless steel sheets and coils and availed of MODVAT credit under Rule 57A. The Assistant Collector, however, held the view that the inter leaving kraft paper cannot be considered as a material used in or in relation to the manufacture of the finished product as it is not an essential material going into the manufacture of stainless steel sheets and coils which can be produced even without the inter leaving paper. The order of the Assistant Collector was challenged in appeal and the Collector (Appeals) held that inter leaving kraft paper can be considered as input within the ambit of Rule 57A which relates to goods in or in relation to the manufacture of the finished products, and the appeal was allowed.

(3.) WE have carefully considered the submissions made by the learned S.D.R. and the papers filed by the respondents. The question is whether the inter leaving kraft paper can be considered as an input for purposes of MODVAT credit in terms of Rule 57A of the Central Excise Rules, 1944. It is stated that the inter leaving kraft paper is used during the coiling and uncoiling process of the stainless steel sheets as a protection against scratches. It is also seen that these papers are used and reused. Therefore, judging from the function of the material, they are more in the nature of the equipment or appliance used in the manufacture of the finished product i.e. stainless steel sheets, to prevent scratches or absorption of oil in the coiling process, and, as such, in terms of the explanation to Rule 57A of the Central Excise Rules, 1944, such materials excluded from the purview of the term 'input', and in such a view of the matter, the material cannot be considered as an input used in or in relation to the manufacture of the finished product. In the circumstances, therefore, there is a lot of force in the contention put forth in the appeal by the Collector and accordingly, the impugned order is set aside and the appeal is allowed.