Customs, Excise and Gold Tribunal - Tamil Nadu
W.S. Industries (India) Ltd. vs Collector Of Central Excise on 9 October, 1990
Equivalent citations: 1991(56)ELT267(TRI-CHENNAI)
ORDER S. Kalyanam, Member (J)
1. This appeal is directed against the order of the Collector of Central Excise (Appeals), Madras dt. 27-11-1989. The short question that arises for consideration in the present appeal is whether the plaster of paris moulds used as an input by the appellant for the manufacture of ceramic insulators could be considered to be an input within the meaning of Rule 57A of the Central Excise Rules, 1944 for eligibility to MODVAT credit. Shri P.C. Anand, Ld. consultant for the appellant submits that plaster of paris mould has no shelf life and for every ceramic insulator one needs a specific plaster of paris mould and, therefore, the same cannot be construed to be either a tool or an appliance for denying the appellant the benefit of Modvat credit. The Ld. consultant also referred to the ruling of the Supreme Court in the case of "Andhra Pradesh Paper Mills v. Collr. of C. Ex., Guntur" and contended that so long as it can be shown that the materials used as inputs have a nexus with the process which is integrally connected with the ultimate production of goods till the same are fit for being put in the marketing stream and such process is so integrally connected with ultimate production of goods that it would be commercially inexpedient to produce the finished goods without that process, all such inputs would get the benefit of credit of duty. The Learned consultant also pressed into service the dictionary meaning for the "appliances" and "tools" and said that the goods in question would stand excluded from the purview of the same.
2. Heard Shri P. Sundararaju, Ld. S.D.R.
3. We have considered the submissions made before us and gone through the papers. The Bench of this Tribunal in the case of "The Mysore Kirloskar Ltd. v. Collector of C.Ex., Belgaum [1990 (50) ELT 175 (Tri.)]" had occasion in similar circumstances to consider the eligibility to Modvat credit of an input used for the manufacture of sand moulds ultimately utilised in the foundry for manufacture of castings and the Bench has held that the input used for making the sand moulds, would not qualify for Modvat credit under Rule 57A of the Central Excise Rules, 1944. Rule 57A excludes machine, machinery tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final product. We would like to particularly emphasise the wording "processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final product" in Rule 57A. The ratio of the ruling of the Supreme Court, in our view, has no application to the facts and circumstances of this case and more particularly for considering a question as to whether plaster of paris moulds could be an input within the meaning of Rule 57A. In our view the moulds are not integrally connected with end-product in question and such moulds are used only as a tool or appliance for bringing about a change in the clay. Therefore, following the ratio of the Bench ruling cited supra, we uphold the impugned order appealed against and dismiss the appeal (Pronounced in the open Court).
V.P. Gulati, Member (T)
4. I agree with the conclusion that MODVAT credit as claimed by the appellants is not admissible for the reason that the paris moulds are not integrally connected with the manufacture of insulators, but for the following reasons:
The issue as seen from the order in original relates to the eligibility to MODVAT credit on the inputs plaster of paris used in the manufacture of moulds and not in respect of duty paid on the moulds.
The learned original authority has accepted the fact that moulds are used in or in relation to the manufacture of the final product and has stated as under in this regard in para 6 of his order:
"The assessee has stated that plaster of paris moulds are used in or in relation to the manufacture of the final product by giving shape to the article in manufacture and is necessary to make the final product accurately moulded. While the function of the mould as stated by the assessee, is accepted, it is seen that this function is not that of an input, but can only relate to that of an apparatus/appliance or a tool with the aid of which the final product are manufactured. They cannot in any case be termed as an input, and hence on merits they are not eligible."
5. The same issue had come up for consideration in the context of inputs used for the manufacture of sand moulds which were used for the manufacture of castings. This Bench of the Tribunal in their order No. 300/90 dated 4-4-1990 has held as under:
"We observe that it is accepted position that goods in respect of which the credit is claimed are used in the manufacture of sand moulds, which do not suffer any duty. The sand moulds, it has been pleaded, after their use only once, are broken after the ironcastings get formed and for that reason these should be treated as intermediate goods. The point to be considered is whether the sand moulds can be considered as intermediate goods and whether by themselves these are one of the excluded category in respect of which the input credit relief under Rule 57A is not available. It is observed the term "intermediate goods" has not been defined in the Rules and has to be understood in the context in which the term "intermediate goods" is used in the trade. The general understanding of the term 'intermediate goods' is that these emerge in the manufacturing stream of a product as something which on further being processed, yield the final product in a manufacturing unit. The term 'intermediate goods' cannot mean the goods which are independently prepared and are not manufactured in the course of manufacture of finished product in the manufacturing stream. The term 'intermediate' has been defined in the Chambers Dictionary as under :-
"placed, occurring or classified between others, extremes, limits, or stages: of igneous rocks, between acid and basic in composition:
intervening. - n. that which is intermediate; any compound manufactured from a primary that serves as a starting material for the synthesis of some other product;".
and in Concise Oxford Dictionary as under:
"coming between two things in time, place, or order; intermediate thing; compound formed by one reaction and then taking part in another esp. during synthesis of commercial products;"
It would appear from the above that sand moulds manufactured by the appellants used in the manufacture of castings do not qualify as intermediate goods." "In the context of where some inputs which have been specified for the purpose of MODVAT Credit under Rule 57A are used for the manufacture of other materials which find use in the factory of production for the specified goods in the case of Andhra Pradesh Paper Mills v. Collector of Central Excise, Guntur in Appeal Nos. E/267 & 268/89/MAS reported in 1990 (50) ELT 252 (Tri.), we have held as under:
"It is thus seen that the Hon'ble Supreme Court has held that so long as it can be shown that the materials used as inputs have a nexus with the process which is integrally connected with the ultimate production of goods till the same are fit for being put in the marketing stream and such process is so integrally connected with ultimate production of goods that it would be commercially inexpedient to produce the finished goods without that process, all such inputs would get the benefit of credit of duty. It is observed that the stress is on the processes which are integrally connected with the production of the goods. Therefore, for the items to pass the test of eligibility to the benefit of the MODVAT credit will be such that they participate in the process of manufacture without which the end product cannot be produced. In the present case, in the case of chemicals used, the learned SDR fairly concedes that so far as softening of water is concerned, the same is a process which is for the manufacture of paper and softening of water is a requirement for the manufacture of paper. He has thus conceded that soda ash used in this process would also be eligible for the benefit of MODVAT credit. In regard to the other chemicals the position is, however, different. Hydrochloric acid is used for cleaning of the wire mesh as and when the same is found to have been clogged."..." The expression "in relation to" has to be read in the context of the manufacturing process of the finished goods covered under the MOD-VAT Scheme. There may be processes which are preparatory in nature and anterior to the start of the manufacturing stream of the finished product but which have to be essentially carried out before the actual manufacturing process of the goods can start or these may be related to the preparing of the material which have ultimately to go into the manufacturing stream or in preparing of certain materials which directly or indirectly participate in the manufacturing process in a manner that these help in the process of manufacture to be carried a step further. The inputs used in these process for manufacture of the products which are in turn used in the manufacturing stream of the finished product can be taken to have been used in the manufacture or in relation to the manufacture of the finished product. Generation of steam which ultimately participates in the manufacturing process is one such item. The other may be pre-treatment of the raw material which go into the manufacturing stream or the materials which may be used for making the end product ready for marketing. The use of the materials has to be such that they carry by their participation, in the manufacturing stream the process of manufacture a step further".
In that case we have also considered the question of use of inputs in the machines, machinery, etc. which are employed in the manufacturing process of a specified finished product and have held that the specified inputs going into the machinery, equipment tools etc, would not be eligible for the benefit of MODVAT credit. We have held as under in that case:
"So far as dandy covers, wire netting and woollen felts are concerned these are essentially parts of the paper making machinery and their use has to be held to be to keep the paper making machinery functional for the production of paper. While these participate in the manufacture of the end product by being a part of the paper making machinery these by themselves do not participate in the process which are carried out in processing the materials which ultimately lead to the manufacture of paper. We observe that while allowing MODVAT credit regard will have to be had to the purpose of the scheme i.e. to reduce the cascading effect of the duty on the finished product by way of relief of the duty paid in respect of the goods which are used in or in relation to the manufacture of the finished product. The machineries, equipments and apparatus by themselves have been precluded from the benefit of the MODVAT credit. Cascading effect of the duty paid on the machinery used in or in relation to the manufacture of the finished goods is not to be mitigated and as a corollary thereto the parts which are used in these machineries to make them functional also are not entitled to the benefit of the MODVAT Scheme. These parts which are used as replacement from time to time have to be held to have been used in relation to the machines themselves and not in relation to the manufacture of the goods".
Following our rationale set out above, we hold that the inputs used in the manufacture of sand moulds, which are by themselves in the nature of tools or apparatus, have to be held to be used in the manufacture of the sand moulds and not in or in relation to the manufacture of the castings. The appellants are also not eligible for the benefit of Rule 57D, as the sand moulds do not qualify to be intermediate goods for the reasons given above.
6. The West Regional Bench in the case of Shivaji Works Ltd. v. Collector of Central Excise Sholapur - reported in 1990 (50) ELT 50 (Tri.) has held that chemicals used in the manufacture of sand moulds which are in the nature of equipment are not eligible for the Modvat Credit under Rule 57A of the Central Excise Rules. In view of the above, I hold that the ratio of the ruling of this Bench as also of the West Regional Bench squarely applies to the facts and circumstances of this case and I find no reason to depart from these decisions. In the result, the plea of the appellant fails and the appeal is dismissed.