2010 (3) TMI 153 - HC - Central Excise

Cenvat / Modvat credit - Whether modvat credit under Rule 57A of the Central Excise Rules 1944 is admissible to the refractory bricks which are constructional material used in lining the furnace and essential part of furnace and are not inputs used in or in relation to the manufacture of final product i.e. steel? Held that 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. - material being used for manufacture of refractory bricks which by stretch of imagination termed as machinery - the manufacturer can avail the modvat crdit in respect of mortar castable powder refractory ramming mass foundry flux and chemicals is available under Rule 57A of the Central Excise Rules 1944

Summary

Issues:
Whether modvat credit under Rule 57A of the Central Excise Rules, 1944 is admissible to refractory bricks used in lining the furnace for steel manufacturing.

Analysis:
The case involved a substantial question of law referred by the Customs, Excise & Gold (Control) Appellate Tribunal regarding the admissibility of modvat credit for refractory bricks used in lining furnaces for steel manufacturing. The provisions of Rule 57-A allow manufacturers to claim modvat credit on inputs used in or in relation to the manufacture of final products, whether directly or indirectly. The manufacturer is entitled to take credit of the specified duty paid on inputs used in the manufacture of final products, as well as on inputs used in or in relation to the manufacture of final products, as per Section 57B. However, credit is not allowed on machines, machinery, equipment, apparatus, tools, appliances, or capital goods.

The court referred to the decision in Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd., where it was held that materials used in the manufacture of final products are eligible for modvat credit as inputs. The court also cited a Division Bench decision in Collector of C. Ex. Chandigarh v. Bhushan Alloys & Steels Ltd., where it was established that modvat credit for materials like mortar, castable powder, refractory, ramming mass, foundry flux, and chemicals is available under Rule 57A. Therefore, based on previous judgments and the interpretation of relevant provisions, the court held that the manufacturer of refractory bricks is entitled to claim modvat credit. Consequently, the question was answered in favor of the assessee and against the revenue.

Overall, the judgment clarified the eligibility of modvat credit for materials used in the manufacture of final products, including refractory bricks essential for lining furnaces in steel manufacturing, based on the provisions of Rule 57A and relevant legal precedents.