R. Jayaraman, Member (T)

1. This is an appeal filed by the Collector of Central Excise, Bombay-Ill, against the order of the Collector of Central Excise (Appeals) bearing No. AMP-465/B-III-215/88 dated 22-7-1988 allowing the appeal of the respondents on merits.

2. Brief facts of the case for the purpose of disposal of this appeal can be stated as below.

3. The respondents are the manufacturers of decorative laminate sheets falling under Heading 39 of the Central Excise Tariff. They were receiving duty paid BOPP films classifiable under sub-heading 3902.31 for use in the manufacture of laminated sheets. They had availed of credit of duty paid on these films, since both the final product and the input were notified under the MOD VAT scheme. The department objected to the availment of the credit of the duty paid on these films used in the manufacture of laminated sheets on the ground that these films act as separators, while putting the sheets into the press and do not constitute as an input in the manufacturing process. These films prevent two layers of sheets from sticking together and they do not form part of the final product and hence cannot be treated as inputs. This could be treated only as appliance or apparatus which gets excluded by virtue of explanation to Rule 57A of the Central Excise Rules. On the basis of this contention, the department issued 5 show cause notices as per the details below:

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4. The Asst. Collector in the adjudication proceedings confirmed the demands and ordered that the aforesaid credits wrongly availed of should be credited in the PLA or by cash recovery and the demand was confirmed in terms of Rule 57-I of the Rules. When the matter was taken up in appeal before the Collector (Appeals), it was pleaded that one of the demands is time-barred and while some are partly time-barred. The appellants also pleaded their cases on merits contending that they are eligible for MOD-VAT credit in respect of these films. However, the Collector (Appeals) without going into the question of time-bar, allowed the appeal of the respondents on merits.

5. Shri K.M. Mondal, the learned SDR, for the department, explained the process of manufacture and also indicated as to how these films are used in relation to the manufacture of the final product - decorative laminates.

6. Shri A. Hidayatullah, the learned advocate also showed the samples of the films before use and also after their use and indicated that these films after use cannot be again used for the same purpose of lamination but can be used as packing material and in fact they are using these as packing material for the upper surface of the laminates.

7. Shri K.M. Mondal, the learned SDR, after explaining the process of manufacture and the use of the inputs in the said process indicated that the films do not form part of the final product and they only function as a separating medium between the two layers so that the two layers do not get stuck with each other, when they were subject to pressing under heat treatment. In view of this, these can be considered only as an appliance or apparatus. Though it is not disputed that these films are used in relation to the manufacture of the final product, these films being in the nature of appliance or apparatus, get excluded from the purview of the MOD VAT credit because of the explanation under Rule 57A. On the question of time-bar, he conceded that according to the decision of the Tribunal taken in regard to similar matters, the demand dated 16-6-88 is wholly time-barred as per Section 11A of the Central Excises and Salt Act, 1944. Likewise the demand dated 25-2-87 is partly time-barred and hence he is not arguing on merits since the issue has already been settled by various decisions of this Tribunal. However, on merits, since the films cannot be construed as part of the finished product but they are used only for separating two layers, as a separating medium, it can only be construed as an apparatus or applianc