S.V. ELECTRICALS LTD. Vs. CCE

JUDGEMENT

(1.) WE have been called upon to decide on an issue referred by the Northern Bench (S) of this Tribunal in view of conflicting decisions on the issue by Two Member Benches. The issue is whether a plain Molybdenum wire used in the manufacture of Tungsten filament falling under Heading 85.39 of the Central Excise Tariff Schedule is an input eligible for Modvat credit under Rule 57A of the erstwhile Central Excise Rules, 1944 for the period December 1996 to July 1997.

(2.) THE appellants were engaged in the manufacture of electric filaments viz. Tungsten filaments falling under the above Tariff Heading, during the above period of dispute. They used Molybdenum wire in the manufacture of Tungsten filament in the following manner: - Tungsten wire of the required size was wound tightly around a Molybdenum wire of pre -determined size on a Primary Coiling Machine with the pitch requisitely adjusted. The coil so produced on the primary coiling machine was called primary coil. The primary coil was then converted into a secondary coil by coiling the primary coil around another thick Molybdenum wire. The Molybdenum wires were then removed by treatment of the coil system with an acid mixture in which the Molybdenum wires dissolved leaving behind the coiled Tungsten filament which was ready for use in a lighting system.

(3.) THE appellants took Modvat credit on Molybdenum wire as input under Rule 57A of the Central Excise Rules, 1944 to the extent of Rs. 2,88,355 during December, 1996 to March, 1997 and to the extent of Rs. 2,17,380 during April to July 97, totalling to Rs. 5,05,735. Two show cause notices were issued in respect of the two periods, wherein the appellants were . directed to show cause why the credit should not be disallowed on the ground that the Molybdenum wire was a consumable 'appliance' used for coiling of Tungsten wire and was not an eligible input under Rule 57A ibid. The notices also proposed to impose penalty on the party under Rule 173Q. The notices were contested. The original authority which adjudicated the dispute disallowed the Modvat credit and ordered recovery of the amount from the party under Rule 571 and also imposed on them a penalty of Rs. 30,000 under Rule 173Q. That authority held that the Molybdenum wire was an 'appliance' used for coiling Tungsten wire and could not, therefore, be treated an input for Modvat credit under Rule 57A. That authority relied on the decision of a 2 -Member Bench of this Tribunal in Apar Ltd. v. CCE, 1993 (67) ELT 364, wherein it had been held that Molybdenum wire which was used as a mandrel for coiling Tungsten wire was an 'appliance' covered by the exclusion clause of Rule 57A and hence not eligible input for Modvat credit. The appeal preferred against the order of the original authority was rejected by the Commissioner (Appeals), who, following the decision of the Tribunal in Jay Electric Company v. CCE, Surat, 2000 (67) ECC 333 (T) : 2000 (118) ELT 737, held that Molybdenum wire was not an input eligible for Modvat credit under Rule 57A. The aggrieved party, therefore, preferred appeal to this Tribunal and the Single Member Bench which heard the appeal passed the referral order. Hence the matter before us.