Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs R.D. Alloys on 29 April, 1991
Equivalent citations: 1991ECR358(TRI.-DELHI), 1991(56)ELT798(TRI-DEL)
ORDER S.V. Maruthi, Member (J)
1. The dispute relates to the eligibility of modvat credit in respect of Hot-tops and sealing compound, Refractories (ramming mass). The respondent manufacture stainless steel ingots and they filed a declaration dated 8-4-1986 to avail modvat credit on the Hot-tops, sealing compound, Refractories (ramming mass) as inputs of the stainless steel ingot which are the end products.
2. The Asstt. Collector disallowed their claim on the ground that these items are part of the apparatus of machinery falling under the exclusion clause.
3. On appeal, the Collector held that the Notification No. 177/86 has a wider scope in admitting the goods under modvat. The goods claimed by the appellants except the ingot moulds are consumed in the manufacture of final product even though they may not be part of the final product and cannot be retreated. These are finally consumed in the manufacture of the final product. Holding as above, he allowed the modvat credit in respect of hot-tops, ramming mass, sealing compounds. Hence, the appeal before us.
4. The question, therefore, is whether the respondents are entitled for the modvat credit in respect of hot-tops, ramming mass, sealing compounds and foundry fluxes.
5. The explanation to Rule 57A defines inputs in the following manner :
"For the purpose of this rule, "input" includes-
a) Inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products and
b) paints and packaging materials, but does not include
i) machines, machinery, plant, equipment, apparatus, tools, or appliances used for producing or processing or any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products;"
6. The Notification No. 177/86 on which the Collector relied upon reads as follows :
"Goods notified for purposes of credit of duty under MODVAT. - In exercise of the powers conferred by Rule 57A of the Central Excise Rules, 1944, the Central Govt. hereby specifies the final products described in column (3) of the Table hereto annexed and in respect of which-
(i) the duty of excise under the Central Excises & Salt Act, 1944 (1 of 1944); (ii) the special duty of excise under the Finance Act, 1988 (26 of 1988);
(iia) the special duty of excise under Sub-section (1) of Section 37 of the Finance Act, 1989 (13 of 1989);
(iib) the special duty of excise under sub-clause (1) of Clause 65 of the Finance Bill, 1990, which clause has, by virtue of the declaration made in the said bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law; and
(iii) the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), (hereinafter referred to as "specified duty") paid on inputs, described in the corresponding entry in column (2) of the said Table, shall be allowed as credit when used in or in relation to the manufacture of the said final products and the credit of duty so allowed shall be utilised for payment of duty leviable on the said final products, or as the case may be, on such inputs, if such inputs have been permitted to be cleared under Rule 57F of the said Rules.
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Sl. Description of inputs Description of final products No.
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(1) (2) (3)
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1. Goods classifiable under any Goods classifiable under any headings of headings of Chapters ... 72,73 Chapters ... 72,73----of the Schedule to -of the Schedule to the Central the Central Excise Tariff Act, 1985 (5 of Excise Tariff Act, 1985 (5 of 1986) 1986).
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7. From a reading of the rule, it appears that only those inputs which are used within the factory of production in relation to the manufacture of the final product, are treated as inputs. It does not include machinery, plant, equipment, apparatus, tools and appliances used for producing any goods. The main contention of Shri Sharma, appearing for the Deptt. is that ramming mass is used in the furnace for internal lining of the furnace to make it cruciable. Therefore, it cannot be treated as input since it is not actually utilised in the manufacture of steel ingots but for preparing the furnace. As regards the hot-tops, his submission is that these are placed on the top of ingot moulds after pouring the molten metal in the mould and they work as insulator and present formation of cavity in the steel ingot. Therefore, these are used to give proper shape to the ingot. Hence, these are part of equipment and not inputs. Sealing compound is used for fixing hot-tops on the ingot moulds and thus, it is used as a part of equipment. Therefore, these products viz; ramming mass, hot-tops and sealing compound cannot be regarded as input. Explaining the scope of the Notification No. 177/86, he submitted that this notification is issued in exercise of the powers under Rule 57A. The expression 'inputs' has been defined under Rule 57A. Therefore, the notification should be read subject to the main provision viz; Rule 57A. Hence, the fact that the heading of the inputs mentioned in notification covers the impugned items does not mean that they are 'inputs' used in relation to the manufacture of final product viz; steel ingots. The notification has to be read subject to the exclusion clause under Rule 57A. He also relied upon the orders of this Tribunal in Shivaji Works Ltd. v. CCE [1991 (50) ELT 15] and Mysore Kirlosker v. CCE [1991 (50) ELT 175].
8. I agree with Shri Sharma, the Departmental Representative. The expression 'input' has been defined under Rule 57A which excludes machines, machinery, equipment, apparatus. From the functions enumerated in the grounds of appeal and also in the order of the Asstt. Collector, the three items viz; hot-tops, ramming mass and sealing compounds, it is clear that they form part of the equipment or apparatus and fall within the exclusion clause provided under the explanation to Rule 57A. We also agree with the contention of Shri Sharma that the Notification No. 177/86 should be read subject to the exclusion clause under the explanation to Rule 57A as explanation is part of the rule whereas the notification is issued under the rule. The notification issued under a rule cannot override the rule itself. Therefore, the notification should be read subject to the explanation, so read, the three items though covered under one of the headings, cannot be treated as inputs as they are equipment/apparatus falling under the exclusion mentioned in the explanation to Rule 57A.
9. The arguments advanced by Shri Aggarwal that in view of the decisions of the Supreme Court in CCE v. Eastern Paper Industries Ltd. [43 ELT 201] and CCE v. Bal-larpitr Industries [43 ELT 804] explaining the word 'raw material', the respondents are entitled for the modvat credit as the three items fall within the expression raw materials cannot be accepted. It is true that the Supreme Court in the decisions referred to above considered the expression 'raw material' and held that anything that enters into and forms part of manufacturing process or is required to make the article marketable must be deemed to be raw material or containing part of the end product and must be deemed to have been used in completion or manufacture of the end product. The Supreme Court was dealing with the raw material used for the manufacture of end product whereas in the instant case, the three items mentioned, form part of the apparatus and therefore, cannot be considered as raw material for the purpose of manufacturing the end product. The reliance placed by him on the order of this Tribunal in CCE v. Jyoti Ltd. [30 ECR 460] holding that the Tribunal has wide powers to pass any order in the interests of justice is misplaced and not relevant to the facts of this case.
10. I, therefore, hold that the Collector is not justified in allowing the modvat credit in respect of the three items viz; ramming mass, sealing compound and hot-tops. I, therefore, set aside the order of the Collector and allow the appeal.