K. Sankararaman, Member (T)

1. This appeal by Collector of Central Excise, Patna is directed against Order-in-Appeal No. 306/Pat/88 dated 31-10-1988 passed by the Collector of Central Excise (Appeals), Calcutta allowing the appeal filed before him by M/s. Ashim Paper Products (P) Ltd., Jamshedpur, (who are the respondents in the present proceedings) holding that wire mesh (wrongly referred to as wire mass in all the proceedings below as well as in the appeal itself) and industrial cloth cannot be called either tools or appliances as held by the Assistant Collector in his order which was challenged in appeal before him and as such the benefit of Modvat credit would be admissible for such wire mesh and industrial cloth used in or in relation to the manufacture of paper. The Assistant Collector, in his impugned order, had held that endless PB wire mesh (wire mass in the order) cannot be treated as inputs because it falls under the category of tools and appliances. He has observed that it is thrown away after 10 or 12 days, that it is used again and again and that it does not also form part of the finished goods. As regards industrial cloth it has been observed by the Asstt. Collector that this item also does not form part of the final product and is thrown away after 15 or 20 days use. He, therefore, took this item also to be a tool and appliance in the process of manufacture of printing paper. He, therefore, concluded that since the two items in question are not treated as inputs as per the explanation to Rule 57A, Modvat credit is not allowable on them. When the matter was agitated before him, the Collector (Appeals) held that it is not relevant whether the inputs form part of the finished product but the relevance is to the extent of its use "in or in relation to the manufacture of the final product". He observed that from the nature of the use of the items in question in the manufacture of printing paper, the fact that they are used in or in relation to the manufacture was clearly established. He also held that these items cannot be called either tools or appliances and accordingly he set aside the Assistant Collector's order and allowed the appeal. In the present appeal before us it has been contended that the Collector (Appeals) fell in error in holding the two items as inputs without going in detail into their specific function. The use of the items wire mesh and industrial cloth in the manufacture of paper has been described in the appeal as below :-

"Paper Machines - The pulp is first diluted with a large volume of water and given a further sieving or straining treatment to remove the last traces of dirt. Thereafter the milk-like fibre held in suspension is fed in a broad uniform stream on to an endless wire cloth which travels forward on horizontally at a regular speed determined by the quality of the paper being produced. The amount of water added to the pulp as it flows on to the wire depends upon the thickness of the paper to be made and the speed at which the machine is to run. In its forward travel the wire cloth is given a slight side shake in order to reduce the tendency of the fibres to settle parallel to the direction of travel. As the pulp is carried forward on the wire it loses most of its water and in order to assist this action the wire, towards the end of its travel, is made to pass over two or three 'suction' boxes which extract most of the remaining water. At this stage also a light wire roller termed the 'Dandy' impresses the 'water-mark' on the soft pulp."

The moist pulp then passes under heavy felt covered roller known as the 'couch-roll' which squeezes out the remaining water sufficiently to enable the pulp to 'carry' as a damp sheet. It is then conducted on a blanket, to the press rolls and then over large steam-heated cylinders. The blankets guide the paper over these cylinders in such a way that the paper is dried evenly over whole of its surface and so kept flat and free from 'cockling' in spit