Customs, Excise and Gold Tribunal - Delhi
Commissioner Of C. Ex. vs Devidayal Aluminium Ind. (P) Ltd. on 24 March, 1998
Equivalent citations: 1998(102)ELT119(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The issue for determination in this appeal is whether Modvat credit as input will be admissible to lubricating oil used in the process of manufacture of brass strips and foils.
2. The facts leading to the present appeal are that the respondent herein are engaged in the manufacture of copper alloys strips and foils, Aluminium pressure cookers and aluminium racks. For manufacture of brass strips and foils in the rolling mill the Appellant used lubricating oil in the continuous process of rolling. The department alleged that lubricating oil is not used in or in relation to the manufacture of strips and foils of brass, therefore, Modvat credit under Rule 57A was not admissible to the appellants. The Collector (Appeals) upheld the view put forth by the respondent herein and allowed the appeal of the respondent. Hence the department has filed the present appeal before us.
3. Shri Sanjeev Srivastava, ld. JDR appearing for the appellant Commissioner submits that their case is covered by the decision of the Tribunal in the case of Kanoria Sugar & General Mfg. Co. Ltd. v. CCE, Allahabad as reported in 1996 (87) E.L.T. 522. He submits that in para 6, the Tribunal held -
"6. Several Benches of the Tribunal and the Courts have gone into the aspect whether a particular input qualifies under Rule 57A or not. However, a general rule has not been so far laid down. The officers had initially also credit was denied on those inputs which got lost during the process. The position emerging so far has drawn a line within which the admissibility is defined and that line is as long as the products are essential for the manufacture of a certain final product they are admissible whether they are directly used, indirectly used, and regardless of whether they are visible, invisible or lost in the process. Such a line is required to be drawn otherwise there will be no barrier prohibiting any inputs. The manufacturing area is lighted by electric lamps. Without illumination no production can take place. But that would not enable a manufacturer to ask for Modvat Credit on the electric lighting bulbs. All the examples cited by the ld. Advocate such as (freon) gas anti-freeze agents etc. are essential for the very creation of the final goods. Any inputs merely making for better operation of the machinery are necessarily to remain outside this line drawn".
Ld. DR submits that since this decision of the Tribunal squarely covered their case, therefore, the order passed by the ld. Commissioner (Appeals) may be set aside and the appeal may be allowed.
4. Shri R.S. Pandey, ld. Consultant appearing for the respondent submits that in their petition before the ld. Commissioner (Appeals), they had clearly indicated that in the rolling mill during the rolling process of copper alloy sheet (brass) lubricating oil is used to prevent scratches and other defects developing in the strips. He submits that in the process of rolling, there is continuous fall of the lubricating oil. He submits that their case is fully covered by the ratio of the Tribunal's decision in the case of Pragati Paper Mills (P) Ltd. v. Collector of Central Excise, Meerut as reported in 1996 (88) E.L.T.137. Ld. Consultant also brings to our notice the decision of the Larger Bench of this Tribunal in the case of Shri Ramakrishna Steel Industries v. Collector 1996 (82) E.L.T. 575. He specifically refers to para 14 of this judgment and submits that according to the findings given in that paragraph lubricating oil in their case is an input used in the manufacture of brass strips and foils. He therefore, submits that the appeal may be rejected.
5. Heard the submissions of both the sides. We have perused the submissions in regard to use of lubricating oil. We find that lubricating oil is used in the process of rolling. It keeps on falling on the brass sheet so that brass sheets do not develop defects in the process of rolling. We therefore, note that in view of the guidelines provided in para 14 of the Larger Bench decision lubricating oil is used in the manufacture of brass strips and foils. For the sake of proper appreciation, para 14 of the Larger Bench decision is reproduced :
"14. We are here dealing with a case where inputs are not necessarily required to be used in the manufacture of final product, but are used "in relation to the manufacture" of the final product, which is an expression of considerably larger import. The words "in relation to the manufacture" are intended to set at rest all doubts. Where raw material is actually used in the main stream of manufacture of final product, that is, actually used in the physical or chemical process of manufacture, it is certainly an input used in the manufacture of final product. The doubt may arise only in regard to use of some article not in the main stream of the manufacturing process but in another stream of manufacturing something which is to be used for rendering final product marketable or used otherwise in assisting the process of manufacture. Such doubt is set at rest by use of the words "used in relation to the manufacture".It is true that sand mould is not a raw material actually used in the manufacturing process of final product in the sense that when mixed with some other articles it would produce the final product. Sand mould is also not used in the preparation of some other article which is necessary to render the final product marketable. It is an article which has a significant role to play in the manufacture of the final product without being used in the main stream of the manufacturing process but without the use of which the final product will never come into being. When such is the case, it is reasonable to conclude that sand mould is used in relating to the manufacture of final product, namely steel castings. It is logical to hold that chemicals or resin which are used in the sand mixture for the purpose of producing sand mould are used, "in relating to manufacture of final product", namely steel castings. The contrary view taken in Mukund Iron & Steel Works Ltd. v. Collector of Central Excise -1990 (48) E.L.T. 552 (Tribunal) and Shivaji Works Ltd. v. Collector of Central Excise -1990 (50) E.L.T. 50 (Tribunal) is not correct.
6. In view of the fact that lubricating oil is used in the process of manufacturing in as much as it keeps on continuously falling on the brass sheets when they are rolled through the rollers, we hold that lubricating oil is an input in terms of Rule 57A. Following the ratio of the judgment of the larger bench as indicated above, we hold that Modvat credit will be admissible on lubricating oil in terms of Rule 57A of Central Excise Rules, 1944. In the result, the impugned order is upheld and appeal is rejected.