ORDER
V.P. Gulati, Member (T)
1. Since a common issue arises for consideration in both these appeals, they are taken up together and disposed of by this single order.
2. The above appeals have been filed by the Collector of Central Excise, Coimbatore, against the respective impugned orders of the Collector (Appeals). Under the impugned orders the lower appellate authority has allowed the pleas of the Respondents that Hylam sheets used by them during the drilling operations of copper clad laminations are eligible for the benefit of MODVAT Credit. He had held that Hylam sheets after the drilling job is done are discarded and these do not have any durability.
3. The learned appellant Collector has urged the following grounds in his appeals :
“During the process of drilling glass epoxy sheets for each stack of drilling hylam sheets are kept both at the top and the bottom of the stack and drilling is carried out. The technical reason for this is to avoid the burr in glass epoxy sheets and ensure the quality of PCBs. The heat generated while drilling would smear the epoxy in the laminate on the surface of the hole. To get accurate drilled holes, avoid burrs and to avoid the epoxy smear, the copper clad laminate is given an upper and lower additional surface material in the form of backup materials. The Hylam sheets are used as the backup materials in the process of the manufacture of Printed Circuit Boards. As per Explanation (i) to Rule 57A of Central Excise Rules, 1944, machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in the substance in or in relation to the manufacture of the final products are not eligible for MODVAT Credit.
In the case of Sathya Steel Strips (P) Ltd., the Hon’ble Tribunal has clearly stated that the appliances used in the process of manufacture cannot be said to be used in or in relation to the manufacture of final product (vide 1988 (38) E.L.T 485 (Tri.). Hylam sheets are only appliances used to avoid smear on the epoxy laminates during drilling processes. Hence the Hylam sheets are not eligible to consider as input for the final product.”
4. The learned DR appearing for the Collector has reiterated the grounds of appeal.
5. The Respondents have urged that the Hylam sheets are placed at the top and the bottom of the glass epoxy sheets to prevent any burring of the holes to be drilled. It has been pleaded that since the holes are being drilled for precision circuitory any burring would spoil the epoxy sheets and the necessary circuit cannot be formed on the same. It has been pleaded that the Hylam sheets are discarded after the drilling has been done. It has been further pleaded that the Hylam sheets as such do not contribute to the drilling function and the same therefore cannot be considered as appliance or apparatus.
6. The short point that falls for our consideration is whether in terms of Rule 57A Hylam sheets can be considered to be among the items which are excluded from the purview of Modvat Scheme. The scope of the excluded items in terms of the definition of inputs set out in Rule 57A is reproduced below:
(i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products.
(ii) to (vi) x x x x x x x x x x x x x x.
We observe that the items which stand excluded from the purview of the term input from MODVAT purposes have to be such as are used for producing or processing any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products. A reading of this explanation shows that for an item to be excluded it has to be such that it performs some function for producing or processing or for bringing about any change in any substance by its action with reference to the notified final products declared in the declaration filed. It is seen that the Hylam sheets as such are placed as a protective cover on the epoxy sheets to prevent burring of the holes and to facilitate drilling of the holes in a very precise manner. The sheets by themselves are not bringing about any change in the epoxy sheets being drilled. In view of above, we hold that Hylam sheets will not fall within the excluded category. We observe that the items excluded have to perform specified functions as set out in the explanation as above before the same can be taken to be excluded from the purview of the term ‘inputs’ as set out in Rule 57A of the MODVAT Rules. In the present case as seen from the facts placed before us the Hylam sheets do not perform any one of the functions as set out in the explanation which would disqualify these for the purpose of being considered as input for MODVAT purpose. In view of the above, the appeals filed by the Revenue are dismissed.