V.P. Gulati, Member (T)

1. These two appeals are against the common impugned order of the Collector or Central Excise (Appeals), Madras dated 29-4-1988. Therefore, the appeals filed before the Tribunal are also being disposed of by a common order.

2. The issue involved in the appeals relates to the benefit of MODVAT credit in respect of the following items - (i) Chipper knives (ii) Wire netting (iii) Dandy covers (iv) Wollent felts (v) Transmission and conveyor belting and aso (vi) hydrochloric acid (vii) P.M. acetate (viii) alfloc powder (ix) bleaching powder and (x) Soda Ash. The use of each of these items is stated to be as under:-

(i) Hydrochloric Acid:- It is used in cleaning of the wire mesh whenever the same is clogged with fibrous material and dirt.

(ii) P.M. Acetate: - It is used as a slimecide to avoid formation of slime in the pipe line during process.

(iii) Alfloc Powder: - This is used in the boiler water treatment but not for maintenance of boiler.

(iv) Bleaching Powder: - Bleaching Powder is used as a germicide in the water treatment instead of chlorine when the same is not available. Chlorination process is stated to reduce the slime formation in the pipe line and is stated to be used in the course of manufacture of paper and not for maintenance of machinery.

(v) Soda Ash: - Soda Ash alongwith lime is used in water treatment plant in softening of water being fed to the boiler to generate steam which is used at different stages of paper manufacture.

(vi) Chipper Knives: - These are used for cutting the wood and bamboo to the desired sizes for further use in the manufacture of paper.

(vii) Wire netting: - The same is used on the paper machines on which the paper gets finally formed and these have to be replaced periodically.

(viii Dandy covers: - These are used as part of the paper machine for proper formation of sheets for writing and printing paper.

(ix) Woollen felts: Pulp is spread on the felts till its conversion into paper sheets and are replaced from time to time.

(x) Transmission & Conveyor belting: - Power is transmitted by the beltings from motors to different equipments in the manufacturing process of paper.

3. The learned lower appellate authority has held that the items in the nature of chemicals etc. could not be taken to have been used in or in relation to the manufacture of paper as the same are either used in the manufacture of other items not suffering duty or are used for the maintenance of machinery. He has also held that the items scaly required for the maintenance of machinery such as wire netting, dandy covers, woollen felts etc. are not eligible for the benefit of the MODVAT credit as the same are solely required for the maintenance of machinery which itself is not eligible for the benefit.

4. The learned Consultant for the appellants in this connection stated that all the items mentioned above are used in or in relation to the manufacture of paper and, therefore, in terms of Rule 57A are eligible for the benefit of the MODVAT credit. In this connection he pleaded that in the context of Notification No. 201/79 which allowed credit of duty paid on inputs used in the manufacture of finished product, the Hon'ble Supreme Court in the case of CCE v. Ballurpur Industries [MANU/WB/0389/1989 : 1989 (43) ELT 404] have implied the scope of the words 'in the manufacture of used in the context of the chemicals used in the paper industry and drew our attention to the observations of the Hon'ble Supreme Court.

5. The learned consultant also cited the judgement of the Hon'ble Supreme Court in the case of Member, Board of Revenue, West Bengal v. Phelps and Co. (P) Ltd. (1972) 29 STC 101 SC. He pleaded that the gloves used by the workers while they were working in the factory have been held to have been used in the manufacture of finished product when they are engaged in hot jobs or in handling corrosive substances. He pleaded that the Hon'ble Supreme Court in this case have followed the ratio of the earlier decisio