Customs, Excise and Gold Tribunal - Mumbai
National Radio And Electronics Co. Ltd. vs Commr. Of C. Ex. on 24 September, 1997
Equivalent citations: 1997(96)ELT289(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The issue for decision in this appeal is the eligibility to Modvat credit of the duty paid on emery cloth belt and emery paper. The appeal had been heard and reserved for orders. However, the Bench was of the view that the issue required to be reheard, especially with regard to the use of the articles in question. The matter was accordingly relisted and both sides heard.
2. Collector (Appeals) has held that both the goods would not be inputs, since they were "identifiable with the equipment" and were falling within the scope of the exclusion clause contained in the Explanation to Rule 57H. The advocate for the appellant explain that the emery cloth belt comprised a closed book of fabric about 10 cms. wide and about 50 cms. diameter, coated with abrasive material on the outside. The belt was put to use by being spread out over rollers, such rollers revolving at high speed.
3. It would be clear from this Explanation that the belt is designed for use and is actually used as part of a larger assembly. It cannot be used by itself and has to be used in conjunction with the rollers. It is therefore part of the equipment for grinding or polishing. The Departmental representative sought to contend that the abrasive coating of the belt was the covered part and that the rollers only acted as accessories of the belt. I am unable to agree. The belt is designed for use with the rollers. Its characteristics such as the external surface alone being coated to indicate this to be the case. The fact that the high speed provided to the belt by the rollers on which it is wounded helps in abrasive action, speeds it up, are of significance. Applying the ratio of the Larger Bench decision in Union Carbide India Ltd. v. Collector of Central Excise, Calcutta -1996 (86) E.L.T. 613 that parts of machines other such goods etc. which have been specified in the exclusion clause contained in the Explanation to Rule 57F would not be covered by the exclusion clause, it has to be held that the belt in question is not an excluded input. There is no dispute that it is used in or in relation to the manufacture of the final product. Credit was rightly taken on the duty paid on it.
4. The other item to be considered is abrasive emery paper. Advocate for the appellant explained that this is a paper covered on one side with abrasive particles and that it is used by the uncoated side being held in the hand and the coated side rubbed on the work piece in order to provide the required abrasive effect. He relied upon the decision of the East Regional Bench in C.C.E. v. Andaman Timber Industries Ltd. -1992 (60) E.L.T. 635 which has held that Aloxide paper used to polish plywood did not fall within the excluded category of [input]. He pointed out that in the decision in Jayashree Timber Products v. CCE -1992 (62) E.L.T. 235 the Tribunal had taken the same view. He contends that in the alternative in any event the matter has been referred to the Larger Bench by the West Regional Bench in Delta Panel Products v. CCE.
5. The Bench had referred the matter to Larger Bench in Delta Panel Products P. Ltd. v. CCE and because different views had been taken in the matter the South Regional Bench in CCE v. Indian Plywood Manufacturing -1993 (63) E.L.T. 328 that sand paper used to polish plywood was a tool and hence fell within the excluded category of inputs. The referring Bench had also taken into consideration the decision in Allied Electronics & Magnetics Ltd. v. Collector -1992 (62) E.L.T. 129 that lap films used in the manufacture of floppy diskettes being consumables are inputs and that Collector v. Weldekar Laminates (P) Ltd. -1990 (49) E.L.T. 538 that Modvat credit used to separate decorative laminated sheets is partly consumed and was therefore an input.
6. These decisions are not relevant for deciding this appeal. It is not possible to show from a reading of the East Bench decisions as to whether paper is to be used by itself or it has necessarily to be used along with any other equipment, apparatus, machinery etc.
7. Paragraph 9 of the Delta Panel Products P. Ltd. decision, it appears that "coated paper is not used by itself but is used along with the machine." The Bench says "The finding that the coated paper is used only in relation to the machine and not in or in relation to the manufacture of goods may need a second look. It is a consumable item used in the machine. The machine is already there even before the paper is used therein for polishing purposes. It is not an integral part of the machine which can be said to be used only for completing the get up or structure of the machine without any use in the process. These observations give rise to the conclusion that the paper is used not independently but in conjunction with the machine.
8. That is not true of the paper in the present case. Here there is no dispute that the paper is used by itself being held in the hand and no other machine or machinery is required for it to be used. These earlier decisions therefore are not relevant for deciding the eligibility of this item to be considered an input or not.
9. It is contented by the advocate for the appellant that sand paper is not to be considered as a tool for the reason that it is consumed and used and since it is not classified as a tool in the tariff in Chapter 82 it cannot be considered as a tool. When asked to what is "consumable" the advocate for the appellants says that anything which is consumed in the process of manufacture is consumer goods. I am unable to appreciate the significance of whether something is consumable goods, machine or any apparatus particularly one that has moving parts in the sense that it gets worn out over a period of use so that the machine or its parts itself, requires that replacement. Thus large machine used in factories get worn out totally or in part and the worn out part requires a replacement. In other words every machine, is essentially a consumable in the sense it gets used up or worn out. I am unable to see any significance whether any particular item gets worn out after some use or many uses. The rules relating to Modvat does not make any distinction between consumables and non-consumables. A reading of the decision in Allied Electronics and Magnetics Ltd. will show that the Bench had not considered the question of whether lap film used in making floppy diskettes was a consumable or not. In the decision in Weldekar Laminates P. Ltd. the Bench had noted that BOPP films used to separate sheets of laminated in the finished nature processes in the law particularly consumed in the processes of manufacture and loses its identity. These observations it appears were made in order to lend support to the conclusion arrived at by the Bench that the film was not a part of machine, machinery or an appliance or apparatus. Apparently the reasoning was that since BOPP films gets consumed after single use it cannot form part of the machine.
10. I am therefore unable to subscribe to this view merely because frequent replacement is needed a particular item cannot be a part of the machine. There are many goods which are parts of machines by their very nature e.g. widths, blades or bands for cutting tools etc. It cannot be disputed that drill bits are parts of drilling machine and blades and paints because of their nature these parts cannot be used for periods which are far shorter than the use to the machine to which they are used for the machines of which they are a part are used. It is this because of which they cease to be parts of machines? The answer obviously is in the negative. Other examples would be electrodes of welding machines, lamps used to provide lamination, film projects. While emphasis on the simple nature of BOPP film in order to accentuate its identity has not been a part of the machine may be justified in the facts of that case. There is nothing in the decision to support the view that merely because the item is "consumable" it cannot be considered to be a part of the machine. Whether sand paper is consumable is not relevant relating to Modvat credit.
11. The order contention is that sand paper is not classifiable as a tool under Chapter 82 of the Tariff and therefore it cannot be considered to be a tool. Appellant relies on the decision in Straw Products v. CC -1992 (59) E.L.T. 572 and CC v. Andaman Timber Industries Ltd. - 1992 (60) E.L.T. 635. In the first decision, the Bench was of the view that chapters to the tariff are applicable to the applicability of Modvat. In the latter decision it reiterated this view, in order to say lends support to the view that for an input to be a tool it should be classified under Chapter 68. These observations were made only in the context of the argument by the departmental representative that Aloxide paper should be considered to be tools. The Bench refused to consider this argument on the ground that the notice and in the proceedings below denied that Aloxide paper was a tool. These decisions do not lend support to the view that because that paper is classifiable under Chpater 82 it cannot be considered to be a tool. It is not all tools which are classified under Chapter 82. It is only tools specified such as hand tools etc. which are classifiable under that chapter. The notes to the chapter itself excludes various items like blow lamps which are tools in common and engineering parlance. The appellant's contention would be acceptable if he could show that all tools are classifiable under Chapter 82 and the present product is not. This he has not been able to do. There is no denial that paper is used as a tool in the sense that it is an instrument of manual operation used to facilitate mechanical operations. Paper is used in order to provide abrasive or polish various items and in the manner in which it is used is clearly a tool. It is a tool that falls within the excluded category in its explanation to Rule 57A being used to process of any goods on which it is used in order to remove projections etc. and to import a smooth surface. Credit has rightly been denied.
12. Appeal allowed to the extent of credit taken of duty paid on emery cloth belt; Collector (Appeals) order is set aside with consequential relief. His finding on emery paper is confirmed.