GCR No.8 of 2001 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Date of Decision: 18.03.2010 Commissioner of Central Excise, Chandigarh ....Petitioner Versus M/s A.S.T.Paper Mills Ltd. ...Respondent CORAM:- HON'BLE MR.JUSTICE ASHUTOSH MOHUNTA. HON'BLE MR.JUSTICE MEHINDER SINGH SULLAR. Present: Mr.Gurpreet Singh, Sr.Standing counsel, for the petitioner. None for the respondent. ASHUTOSH MOHUNTA, J. (ORAL) The Customs, Excise & Gold (Control), Appellate Tribunal, vide its order dated 6.7.2001, has referred the following substantial question of law for adjudication by this Court:- “Whether modvat credit is admissible on wire Cloth and Felt when the same neither fall under the category of inputs under Rule 57-A as the same have not been used directly or indirectly in relation to the manufacture of the final products?” The provisions of Rule 57-A granting incentive to the manufacturer was inserted in order to expend the business premises in India. The combined reading of this provision would reveal that the manufacturer is entitled to claim the modvat credit on such finished excisable goods as the Central Govt. may notify and the credit of specified duty under this section shall be allowed on the inputs used in the GCR No.8 of 2001 2 manufacture of final products as well as on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. According to section 57B, the manufacturer of final products shall be allowed to take credit of the specified duty paid on the inputs used in or in relation to the manufacture of final products, whether directly or indirectly and whether contained in the final products or not, namely, (i) the inputs, which are manufactured and used within the factory of production, but according to section 57B (2), the manufacturer of the final products shall not be allowed to take credit of the duty paid on machines, machinery, equipment, apparatus, tools, appliances or capital goods. It means, the assessee is entitled to avail the modvat credit on the inputs/material used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. In Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd. (2003) 4 Supreme Court Cases 758, the Hon'ble Supreme Court has held that the material used in the manufacture of final products would be eligible modvat credit being an input. The manufacture of paper and paper board are covered under exclusion clause 57A of the Act. In fact, in Escorts Mahle Ltd.'s case (supra), even parts of machinery would be eligible for modvat credit. In case Collector of Central Excise v. Zenith Papers 2002 (146) ELT 518 (P&H), a Division Bench of this Court held that use of wire mesh and felt are to be inputs and assessee is entitled to claim modvat credit. Similar view was taken by a Division Bench of this Court in case Commissioner of Central Excise v. Sukhna Paper Mills and Anr. 2002 (82) ECC 469. In view of the above, we are of the considered view that use of wire cloth and felt would be entitled to modvat credit when used in GCR No.8 of 2001 3 manufacture of final products. Resultantly, the question posed is answered in favour of the assessee and against the revenue. (ASHUTOSH MOHUNTA) JUDGE March 18, 2010 (MEHINDER SINGH SULLAR) AS JUDGE