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TMI Blog1990 (2) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... ilment of MODVAT credit vide their application dated 14-7-1986. They were purchasing/receiving duty paid Oxygen Gas falling under sub-heading 2801.31 of Central Excise Tariff 1985 for manufacturing iron and steel etc. by breaking up of old ships and vessels purchased by them through M.S.T.C. They had taken the credit of Oxygen Gas received by them under the MODVAT scheme from 24-7-1986. As the oxygen gas was used for cutting purpose, it was not considered by the department, as an input and the department felt that the party was not entitled to credit for the said input under the said MODVAT scheme and hence served a show cause notice dated 16-10-1986 for reversal of the credit of Rs. 30,165.47 availed of for a period from July to September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he oxygen gas was a consumable item and was not "tool" which is exempted from the applicability of the credit under Rule 57A. The learned advocate referred to and relied upon the decision of this Bench in Gujarat Alkalies and Chemicals Ltd. v. Collector of Central Excise -reported in 1989 (41) E.L.T. 424 (Tribunal) and submitted that by process of using the oxygen gas re-rollable scraps are manufactured which could not be done without the use of the gas cutter. He also cited the decision of the Calcutta High Court reported in 1987 (30) E.L.T. 118 (Cal.). 4. Shri C.P. Arya, the learned SDR, for the department, supported the orders of the authorities below and submitted that the main use is to be considered and here in the instant case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting the steel plate and obtaining sheet plates and sheets from the ship". From this it appears that they use oxygen gas cutters for cutting the plates in the ship, in different sizes. 8. Rule 57A of the Central Excise Rules, 1944 provides for grant of credit for the duty paid on inputs. In the explanation to the said Rule, 'inputs' eligible for credit are specified, though the definition is not exhaustive. In the said explanation, however, a specific mention is made as to which items would not go as inputs. The excluded items are specified as under : "but does not include - (i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en gas used to run the said apparatus, naturally is the one used in relation to the said tool, as without its use, the tool/appliance would not function. The Technical Dictionary meaning of the apparatus is also "a compound instrument designed to carry out a specific purpose," and considering this, the gas cutter, an instrument becomes functionable only with use of the gas. Even if by making use of the said tool, a "product" comes into existence, the main use of the same does not change its structure from being called a tool. All tools in that case, bring about same manufactured article, but even then, they are meant to be kept excluded from the benefit of availment of credit as input. It could be argued that tools contemplated to be exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of M/s. Mukund Iron and Steel Works Ltd. v. CCE, Bombay-II, in order No. 115/89-WRB, dt. 5-12-1989 (in appeal No. E/87/89 Born.). The issue considered there related to extension of MODVAT credit in respect of acetylene gas used for separating the runners and risers attached to the casting, as they are taken out from the mould. We allowed the availment of the MODVAT credit in respect of acetylene gas mainly because it could not be equated as a tool as held by the department and it is used directly in the manufacture of casting and that without separation of runners and risers, casting of the required size and shape cannot come into existence. We also treated the acetylene gas as a consumable item used in relation to the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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