1990 (3) TMI 178 - AT - Central Excise

Summary

Issues:
- Modvat benefit eligibility for oxygen and acetylene used for cutting and welding.
- Disallowance of Modvat credit based on photocopies of Gate Passes.

Analysis:
1. The judgment pertains to a batch of stay petitions and appeals related to Modvat benefit eligibility for oxygen and acetylene used for cutting and welding, and the disallowance of Modvat credit based on photocopies of Gate Passes. The Collector of Central Excise (Appeals) allowed the appeals filed by M/s. Heavy Engineering Corporation Ltd., Ranchi, granting them Modvat benefit for the mentioned gases. The Collector (Appeals) held that disallowing credit based on photocopies of gate passes was improper and that the credit should be granted to the company.

2. The tribunal dismissed the stay petitions as it was not a case of undue hardship for the department if the Order-in-Appeal was implemented. However, the dismissal of stay petitions did not hinder the hearing of the appeals themselves. The tribunal highlighted the requirement under Section 35F of the Central Excises & Salt Act, 1944 to deposit duty pending appeal, but restoration of disallowed Modvat credit was not a prerequisite for hearing the appeal.

3. The Appellant Collector argued that oxygen and acetylene were not used in the manufacture of the finished product but as tools for cutting purposes, falling under the exclusion in the Explanation clause of Rule 59A. The Collector (Appeals) had not considered the nature of their use while granting Modvat benefit.

4. The Appellant Collector also raised concerns about allowing Modvat credit based on photocopies of Gate Passes, citing potential revenue risks due to the possibility of multiple claims against copied passes. The Collector sought to set aside the Order-in-Appeal.

5. Responding to the arguments, the counsel for the respondents contended that the original decision to disallow Modvat credit was flawed and lacked proper communication. He emphasized that most goods were directly received from manufacturers, reducing the risk of revenue loss from accepting photocopies of Gate Passes. The counsel requested the dismissal of the department's appeals.

6. The tribunal analyzed the usage of oxygen and acetylene, determining that they were essential goods in the manufacturing process, contrary to being considered tools. It clarified that these gases were not excluded under Rule 57A and were integral to the manufacturing of finished goods. The tribunal differentiated between welding for manufacturing operations and non-manufacturing purposes for Modvat benefit eligibility.

7. Regarding Modvat credit based on photocopies of Gate Passes, the tribunal agreed with the Appellant Collector's contentions, suggesting a remand for proper representation by the respondents. The tribunal emphasized the need to decide on the admissibility of Modvat credit for oxygen and acetylene based on the observations made in the order.

8. Ultimately, the tribunal disposed of the stay petitions and appeals accordingly, pronouncing the operative part of the order in open court on the specified date.