2002 (4) TMI 180 - AT - Central Excise

Summary

Issues:
1. Eligibility of water treatment chemicals as inputs for credit.
2. Interpretation of the term "in or in relation" to the manufacture of the final product.
3. Comparison of different judgments on the eligibility of certain chemicals for credit.

Analysis:

Issue 1:
The appeal concerns the eligibility of Macscal and Macperz, water treatment chemicals used for treating cooling water, as inputs for credit. The Commissioner (Appeals) concluded that these chemicals are essential for preventing damage to equipment, ensuring proper functioning, and increasing equipment lifespan. Without these chemicals, rapid corrosion and malfunctioning would occur, leading to deviation of plant parameters and production of sub-standard goods. The chemicals were deemed to be used "in or in relation" to the manufacture of the final product, directly or indirectly, based on previous judgments.

Issue 2:
The Tribunal analyzed the term "in or in relation" to the manufacture of the final product in the context of the chemicals used for treating cooling water. It was established that the chemicals directly contribute to preventing corrosion and enhancing the durability and smooth functioning of machinery, which are crucial for the manufacturing process. The Tribunal emphasized that the plant's functioning is dependent on the treatment of machinery with these chemicals, establishing a direct and indirect relation to the manufacture of the final product.

Issue 3:
The Tribunal compared the present case with a previous judgment regarding the eligibility of certain chemicals for credit. It was noted that the chemicals in question were used for different purposes in the generation of steam, unlike the chemicals under consideration, which were specifically used for treating cooling water to prevent corrosion and ensure machinery durability. The Tribunal distinguished between the two scenarios, highlighting the direct and indirect relation of the chemicals to the manufacturing process, leading to the rejection of the Revenue appeal.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) regarding the eligibility of water treatment chemicals as inputs for credit, emphasizing their essential role in preventing damage to equipment and ensuring the smooth functioning of machinery in the manufacturing process. The Tribunal rejected the Revenue appeal based on the direct and indirect relation of the chemicals to the manufacture of the final product, as established by previous judgments and the specific use of the chemicals for treating cooling water.