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"12.3 It may also not be out of context to mention here that even the Tax Reforms Committee Chaired by Professor Raja Chelliah in their final Report Part I (vide para 4.11 of Chapter 4) have cited this specific case of dry cell used in Quartz Clock as one example, arising out of lack of understanding of the economic justification for extension of Modvat Credit and it is a case of denial of relief, at the Officer's discretion."

The finding was that the battery cells are not accessories but component parts of the clocks and timepieces going by the ratio of the Supreme Court decisions in Collector v. East End Paper Industries - 1989 (43) E.L.T. 201 and Collector v. Jay Engineering Works - 1989 (39) E.L.T. 169. The relevant observations from the East End Paper Industries judgement are extracted below :-

As regards the applicability of the Supreme Court judgment regarding typewriter ribbons to the present case, we feel with respect, that the question whether the ribbons are component parts of Printers or only accessories thereof is not the test for deciding admissibility of Modvat Credit at the hands of the manufacturer of the Printers. Such a question was relevant in the Kores case where the ribbons were manufactured and sold by a Ribbon manufacturer and not sold by a typewriter manufacturer after fitting the ribbon therein. Though factors like essentiality of the accessory in question for the functioning of the article and the inclusion of the cost of such accessories in the value of the article in question may not be conclusive for deciding the admissibility for Modvat of such accessories and the real test is whether the said accessories are used in or in relation to the manufacture of the final product, we are of the view that the Ribbons in the present case satisfy this test as already examined by us in paragraph 11 of this order. The observations in the Tax Reforms Committee about dry cells used in Quartz Clock referred to in the Jayshree Industries decision will be equally applicable in the present case.