V.P. Gulati, Member (T)

1. This is an appeal filed against the order of the Collector of Central Excise (Appeals), Madras dated 29-7-1988. The Learned Consultant at the outset fairly pointed out that the matter is covered against him by the order of this Bench in Order No. 299/90 dated 4-4-1990 MANU/CC/0008/1990 : 1990 (50) ELT 252 (Tri.). He has pleaded that he will be confining his arguments only in respect of the wire mesh and woollen felts and that he is not pressing the claim in respect of other items. In regard to wire mesh and woollen felts, the facts are distinguishable from the ones that the Tribunal has set out in the order referred to above. He pleaded that both the materials were known in the paper trade as raw materials and their use has to be taken as that in the process for the manufacture of paper and not with reference to the paper machine. In this connection he pointed out that this Tribunal has held in the case of graphite electrodes that the same are eligible for MOD VAT credit and stated the position in regard to the use of these two materials is almost similar to that of the use of electrodes. He pleaded that woollen felts are used for removing water and moisture content from the pulp and the wire mesh is used for removing the moisture and also helps in further drying up of the pulp material and participates in the formation of the paper on the machine. In this view of the matter, he pleaded that the benefit of MOD VAT is available to them. He further pleaded that only in the event when these items are treated as appliances or tools, these could be held to be ineligible for the benefit of Modvat in terms of the proviso to Rule 57-A of the Central Excise Rules, 1944. His plea is that these are not in the nature of appliances and tools and these, not being part of the paper 'machine, the benefit of Modvat credit would be available under Rule 57-A.

2. The Ld. SDR pleaded that the use of these two items is more in the nature of appliances and, therefore, the benefit of Modvat credit is to be denied.

3. We observe that the two items are used in the paper machine section of the paper mill and the use of these two items in the paper machines is to make the machine functional. This Bench of the Tribunal, as pointed out by the Ld. Consultant at the very outset, has given detailed reasons as to why these items have to be precluded from the benefit of Modvat credit. In this connection, the relevant portion of the order of the Tribunal cited supra is extracted below:

"So far as dandy covers, wire netting and woollen felts are concerned these are essentially parts of the paper making machinery and their use has to be held to be to keep the paper making machinery functional for the production of paper. While these participate in the manufacture of the end-product by being a part of the paper making machinery these by themselves do not participate in the process which are carried out in processing the materials which ultimately lead to the manufacture of paper. We observe that while allowing MODVAT credit regard will have to be had to the purpose of the scheme i.e. to reduce cascading effect of the duty on the finished product by way of relief on the duty paid in respect of the goods which are used in or in relation to the manufacture of the finished product. The machineries, equipments and apparatus by themselves have been precluded from the benefit of the MODVAT credit. Cascading effect of the duty paid on the machinery used in or in relation to the manufacture of the finished goods is not to be mitigated and as a corollary thereto the parts which are used in these machineries to make them functional also are not entitled to the benefit of MODVAT scheme. These parts which are used as replacement from time to time have to be held to have been used in relation to the machines themselves and not in relation to the manufacture of the goods. In the scheme of MODVAT if the parts of the machines are included there is no rea