TMI Blog2001 (3) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector, under Adjudication Order No. 15/90, dated 15-5-90. disallowed the Modvat credit on all goods, except Activated alumina, holding that these were not eligible for Modvat credit as they did not come within the scope of the term "inputs" as envisaged in the Modvat Rules. The Assistant Collector allowed the Modvat credit in respect of Activated alumina as it was used for the PACOL unit for removal of fluorides impurity and residual hydrofluric acid from the recycle paraffin stream and as such was used directly in the process of manufacture. 2.2 He, further, mentioned that on appeal filed by the Appellants, the Collector (Appeals), under the impugned order No. 407/90 (M), dated 13-12-90, upheld the Adjudication Order, except in respect of Butyle Mercaptain, holding that the impugned goods could not be said to be used in or in relation to the manufacture of the final product, LAB as these were used for demineralising water and maintaining its PH, and for keeping the equipment, machine and machinery in a proper functional order which are specifically excluded under Rule 57A; that Butyl Mercaptain was used directly in the manufacture of LAB as it was used to maintain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambit of the term "used in or in relation to the manufacture of the final product"; that the Demineralized water is used in the plant in Hydrotreater unit for purifying kerosene by removing the absorbed salts, in PACOL unit to control the activity of the PACOL platinum catalyst and thereby improving the LAB yield and in Alkylation Unit to maintain the required level of moisture of hydrochloric acid in order to separate the acid from the product by settling and for generation of steam which is used in the process as atomizing medium in heat and vacuum ejectors to produce vacuum; that Cation and Anion Resins absorb the impurities present in the water; that due to this process, the absorbing property of the resin is reduced and they have to be reacted; that such reaction is done with the help of Hydrochloric acid and caustic soda lye which remove the impurities from the surface of the resin; that in the absence of D.M. water, LAB production cannot be achieved; that even though DM water is not directly seen in the constituents of LAB, it contributes to LAB production by - (i) Increasing the activity of the catalyst, (ii) Removal of impurities in the feed kerosene, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e presence of the end-product as such, is rendered impossible". He also mentioned that the expression "in relation to" is used in the expansive sense; that in Doypack Systems (Pvt.) Ltd. v. UOI - 1988 (36) E.L.T. 201 (S.C.), the Apex Court held that the expression "in relation to" (so also "pertaining to") is a very broad expression, which might both have a direct significance as well as an indirect significance depending on the context. The term "relate" is also defined as meaning "to bring" into association or connection with. It has been clearly mentioned that "relating to" has been held to be equivalent to or synonymous with as to "concerning with" and "pertaining to". The expression "pertaining to" is an expression of expansion and not of contraction". He, therefore, concluded that all the impugned items are used "in relation to manufacture" of their final product LAB and are eligible inputs. 5. Countering the arguments, Shri S. Kannan, learned D.R., vehemently submitted that only a very minor percentage of demineralised water (D.M water) is used in the various units in the process of manufacture; that most of the D.M. water is used for generation of steam and as such cation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture" of the final products. The words used in Rule 57A are not only "in manufacture of the final product" but are "used in or in relation to the manufacture of the final product". It has been held by the Supreme Court in CCE v. Rajasthan State Chemical Works - 1991 (55) E.L.T. 444 (S.C.) that the expression "in relation to" must be given a vide connotation. The Larger Bench of the Tribunal in Union Carbide India's case, supra, had the occasion to interpret this expression. It was held therein that this expression has been used in Rule 57A 'to widen and expand the scope, meaning and content of the expression "inputs" so as to cover goods which not enter directly or indirectly into the finished product but are used in any activity concerned with manufacture of goods'. The Larger Bench observed "By no interpretive process, the deliberate design of the rule making authority can be frustrated nor words and expressions disregarded as otiose." Further, in Gujarat Alkalies Chemicals Ltd. v. CCE, Vadodra - 1996 (81) E.L.T. 117, the Tribunal held that Monoethylene Glycol (MEG) which is added to water for use as an anti-freezing agent in the chilling plant so that solution does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sformer Oil is concerned, the Larger Bench of the Tribunal in the present case itself, on reference made by this Bench, has held that HOT certainly has a direct role in the actual process of manufacture of LAB and is an input eligible for the Modvat Credit. As far as the other impugned chemicals are concerned, we are of the view that all of them are used either to manufacture Demineralised Water or for cooling water treatment in cooling tower. The use of these chemicals has not been disputed by the Revenue. The Revenue's main objection is that only a negligible fraction of D.M. Water is used in the process stream and that the major portion is used in the boiler to generate steam and as cooling water. But the Revenue forgot to realize that both the steam and cooling water themselves are used in or in relation to the manufacture of LAB, the final product of the Appellants, and as such Modvat Credit under Rule 57A will be available in respect of these chemicals. There is no substance in the submission of the learned D.R. that chemicals are used to avoid corrosion and algae formation which does not aid manufacture but helps in keeping the Tube corrosion free. The Larger Bench of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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