TMI Blog2000 (12) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-5-1996 Rs. 45,31,866.00 2. 19/97 - 1-4-1997 Rs. 41,975.93 3. 95/97 - 13-11-1997 Rs. 23,87,454.00 4. 1/98 - 8-1-1998 Rs. 6,19,279.75 3. The facts of the case are that the assessees are manufacturing Aluminium and articles thereof falling under Chapter 76 of the Schedule to the Central Excise Tariff Act. They are also availing the credit of duty on various inputs under Rule 57A of the Central Excise Rules, 1944. They had also availed the said credit in respect of 40 inputs. However, the lower authorities held that these did not fall within the definition of inputs in terms of Rule 57A as the same were not used in relation to the manufacture of final products. Hence, they prepared appeal before the Commissioner (Appeals), who on consideration upheld the assessee s contention in so far as the following items are concerned by giving his finding on the nature of use of the items against which Revenue has also come in appeal contending that they are not items used in the process of manufacture of final product and Modvat credit is required to be denied :- (1) Hydrochloric Acid (HCL) :- The Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollution equipments were eligible for credit that too with effect from 23-7-1996 by virtue of the substitution of the explanation to Rule 57Q. In this regard, Revenue relies on the ratio of Tribunal decision in Gujarat Alkalies and Chemicals Ltd. reported in 1996 (81) E.L.T. 117 (T) wherein acid used in an effluent treatment plant to destroy the traces of sodium cyanide in the effluent before discharging it, has been denied the benefit. 4.2 Party s contention is that besides the above function noted, it is also used for demineralising boiler feed water to avoid scales formation and corrosion in process pipelines. The assessee contends that the judgment relied by Revenue is not applicable and distinguishable as the present case was on a different footing. They also rely on this Bench decision rendered in the case of Madras Aluminium Co. Ltd. by Final Order No. 1683/99, dated 7-7-1999 rendered by the then Late Member (T) Shri V.K. Ashtana. It is stated that this ratio of this judgment is identical to the facts of this case and would apply in toto. Besides this decision, they are relying on the judgment of the Northern Regional Bench rendered in High-Tech Carbon v. C.C.E., Allahaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e up for decision in the case of J.K. Cotton Spinning Weaving Co. Mills Ltd. v. S.T.O. - 1997 (91) E.L.T. 34 (S.C.) = 1965 (16) STC 563. It was held therein that the expression in the manufacture of goods should normally encompass the entire process of converting raw materials into finished goods. It was further held that where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression in the manufacture of goods. Applying this criterion to the present production of steam is a necessary and essential process in the manufacture of carbon black. From the record I find that the appellant have explained that steam is used by them as follows :- (1) Thermal cracking by atomising of carbon black feedstock by passing it through high pressure steam. (2) Quenching the heated carbon black powder in the quench tower. (3) Pelletising carbon black powder into pellet form. (4) As a heating medium for heating carbon black feed stock. The production of steam by boiling demineralise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner (Appeals) accepted the fresh plea that coal carbon paste made from these items is used as anode in the electrolytic cell where the electrolysis of alumina takes places and that this carbon paste is different from the carbon electrolytic paste used for bonding the carbon blocks. Further observation of the Commissioner (Appeals) is also challenged inasmuch as he held that these items are absolutely necessary for electrolysis to take place without which aluminium metal cannot be produced and therefore, are essential inputs under Rule 57A. The ground for challenging is that the paste made from these items may be different from the carbon electrolytic paste used for bonding the carbon blocks and these items may be essential for manufacture of aluminium. The element of essentiality will not render an item to qualify as an input. Revenue state that the essential test that these are used in or in relation to the manufacture of final product as required under Rule 57A has not been answered by these items. They contend that the paste made from these items was used as anode in the electrolytic cell in which the aluminium is extracted in the electrolytic process. Electrolytic cell is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing this ratio, Revenue appeal on these items is rejected by upholding the Commissioner (Appeals) order. 7. As far as the item Non-Ferric Alum is concerned, Revenue contends that cryolite is an input used in the manufacture of aluminium. The Non-ferric alum is used for recovering cryolite for recycling and also for water treatment purposes. As the non-ferric alum is not used in or in relation to the manufacture of final product but is used to recover the raw material (cryolite) itself, it cannot be considered as an input within the meaning of Rule 57A. 7.1 The assessee contends that non-ferric alum is used for recovering cryolite which can again be used as input in the electrolysis process and is required to be granted benefit as held in the case of C.C.E., Chandigarh v. Goetze India Ltd. - 1996 (86) E.L.T. 513. 7.2 We have considered the submissions on this item and have perused the above cited judgment of the Tribunal wherein it has considered the issue of Aluminium oxide used in removing impurities in Aluminium scrap which in turn used in the manufacture of piston rings and cylinder liners is an input. Hence, the Tribunal after considering the large number of judgments inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the items without examining the manner in which these items are used and how they are used in or in relation to the manufacture of the final goods. 10. Assessee s contention is that they are not used for repair or maintenance. They submit that the steel rods are used (i) for grinding of bauxite with caustic soda in Rod Mill and (ii) for the Soderberg Carbon Paste as Anode in position and carry current from main Bus Bar to Carbon Anode and they are regularly consumed. 10.1 M.S. Flat : It is used to connect the main bus bars with Cathode in the electrolytic cells for electrolysis process by which aluminium is extracted. This material is also regularly consumed. 10.2 As regards stainless steel sheets and rods, they contend that they are used in the manufacture of extrusion. They have outlined the manner in which the extrusion come into existence by putting the bars a complete picture of the manufactured items. They contend that it is used to hold the anode aluminium beam through which the current is passed for electrolysis. 10.3 They have also given a write up on the materials used and the same is reproduced herein below :- A SHORT WRITE UP ON THE MATERIALS USED FOR THE FABR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luminium bus bar in a flexible manner. 10.4 A schematic diagram is also shown by which they have contended that the items are used in or in relation to the process of manufacture and the items are required to be granted benefit of Modvat credit. 11. On a careful consideration of the submissions and on perusal of the judgments and also the write up given, we are satisfied that the items are not used for repair or maintenance but they are used in or in relation to the manufacture of final products. The ratio of the following judgments are also taken into consideration. 11.1 In the case of Star paper Mills Ltd. v. C.C.E., Meerut - 1999 (107) E.L.T. 241, the Tribunal noted that hot-rolled coil in plate form used in the manufacture of storage and processing tanks which in turn are used as capital goods in the manufacture of paper were held to be eligible to credit as input by virtue of sub-para 2 of Rule 57D. This judgment also applies to the facts of this case. 12. (i) Oxygen Gas (ii) Acetylene Gas (iii) Welding Electrodes (iv) CI Welding Electrodes (v) Aluminium Welding Wire (vi) Pig Iron. 12.1 The Commissioner in the impugned order has noted that all these i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of process of manufacture and not used as capital goods or for repair/maintenance. (b) The ratio laid down in the case of Orient Paper Mills - 1994 (73) E.L.T. 563 (T) would apply to the facts of this item also wherein it was held that wrapping and packing paper used for packing and wrapping paper to make the latter marketable was held to be material/component part in relation to such paper. Hence, it was held that inputs used for such paper was used as an input in relation to the manufacture of final product. Therefore, the ratio arrived at after looking into the various judgment would apply to these items also as the items are not used as repair or maintenance of the plant and machinery but used as inputs which go for the final product. (c) In the case of Jawahar Mills Ltd. - 1999 (108) E.L.T. 47 (T) wherein electrodes have also been considered to be eligible for Modvat credit including wires and cables. This Larger Bench judgment would apply to the above items also. Hence, Modvat credit is held to be allowed on these items. 13. It is observed from the order-in-appeal impugned that the Commissioner (Appeals), after recording the name of the goods and the us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly, the item Conveyor Belt is part of conveyor system and it is the conveyor system that is found to be capital goods and not Conveyor Belt by the Commissioner (Appeals). Therefore, the nature of these goods is required to be examined i.e., whether they are parts or full machinery and thereafter the eligibility of these items is required to be re-determined by the original authority in the light of the Larger Bench decision. 14. Transformer Oil : - It is said to be used as coolant in the transformer to provide uninterrupted power supply for the process. The Single Member Bench decision in the case of Rom Electricals - 1998 (101) E.L.T. 281 is relied upon by the assessee. The ratio of this judgment would clearly apply to the facts of this case and hence, it is to be allowed. However, we notice that there is a Larger Bench judgment in the case of furnace oil Ballarpur Industries Ltd. [2000 (116) E.L.T. 312] wherein furnace oil has been held to be not eligible for benefit of Modvat credit but the said ratio cannot be directly applied to this item as there is CBEC Circular No. 334/60/97-CX, dated 22-10-1997 which states that furnace oil is eligible for the benefit of Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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