POLYNOVA INDUSTRIES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) -WHETHER release paper used for the manufacture of coated textile fabrics commonly known as leather cloth is an input eligible for MODVAT (Modified Value Added Tax) credit, or it is a tool, equipment, or appliance and therefore, excluded from the benefit of the MODVAT scheme, is the essential controversy in this petition.

(2.) PETITIONER No. 1 is a manufacturer of coated textile fabrics coated with Poly Venyl Choride or with Poly Urethane at its factory at Kundaim, Goa. They are holding the necessary licence under the Central Excise Tariff Act, 1985. In the manufacture of coated textile fabrics, they use release paper which is required to be imported and there is no dispute that upon import of release paper it is subject to the payment of customs duty. The product thus manufactured by the first petitioner falls under Chapter 59 of the Schedule to the Central Excise Tariff Act which comes under the heading "impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use". Under heading No. 59. 03, in Chapter 59 of the Schedule, the item described reads thus :-

(3.) MODVAT scheme was introduced in Rule 57-A of the Central Excise Rules sometime during the financial year 1986-87. In terms it states that it will apply to such finished excisable goods referred to as the "final product" as the Central Government may, by Notification in the Gazette specify in that behalf for the purposes of allowing credit of any duty of excise or additional duty under section 3 of the Customs Tariff Act, 1975 as maybe specified in the notification, paid on the goods used in or in relation to the manufacture of the said final products which are referred to as "inputs" and further for utilising the credit so allowed towards payment of duty of excise leviable on the final product, whether under the Act or under any other Act, as may be specified in the Notification and subject to the provisions of the sections and the conditions and restrictions, that may also be notified in the Notification.