Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Central Excise vs Mico Ltd. on 22 November, 1994
Equivalent citations: 1995ECR384(TRI.-CHENNAI), 1995(76)ELT157(TRI-CHENNAI)
ORDER
S. Kalyanam, Vice President
1. This appeal is by the Department and directed against the order of Collector of Central Excise, Bangalore, dated 30-9-1991.
2. Shri Jeyaseelan, the learned DR contended that the issue is with reference to eligibility to MODVAT credit of inputs like dipping compound and the Ethyl Cellulose in the manufacture of delivery valves and elements in terms of Rule 57A of Central Excise Rules, 1944 and a further issue relating to the grant of permission under Rule 57F(2) for sending out Ethyl Cellulose for conversion and manufacture of dipping compound.
3. Shri Jeyaseelan, the learned DR adopted the reasoning in the order of the original authority and contended that dipping compound is not an input in the manufacture of delivery valves and elements. It was urged that the manufacture of delivery valves and elements [are] complete even before coating of the dipping compound and the coating with the dipping compound is done only for the purpose of protecting the goods in transit and, therefore, it is not an input in the manufacture of delivery valves. It was further urged that Ethyl Cellulose also is not an input in the manufacture of the end product and, therefore, permission under Rule 57F(2) for Ethyl Cellulose for manufacture of dipping compound does not arise.
4. Shri Sampath, the learned Counsel for the respondent submitted that dipping compound is an integral part in the manufacture of the finished product and without the dipping compound the delivery valves and the elements would not become functional. The dipping compound provides the protection cover for element and delivery valves so that while marketing the product lubrication is maintained to the required degree. Reliance was placed on the ruling of the Hon'ble Supreme Court in the case of Eastend Paper Industries reported in 1989 (43) E.L.T. 201 to contend that materials required for the essential process of manufacture have to be construed as "inputs" falling within the mischief of Rule 57A of the Central Excise Rules, 1944. It was further submitted that even if dipping compound is treated as a kind of packaging material, it has to be treated as an intermediate product and as per the ratio in the case of Ponds India Ltd. reported in 1993 (63) E.L.T. 3 and Parley Products case reported in 1992 (57) E.L.T. 152 and other rulings, the packaging material need not be in ready to use condition and Rule 57F(3) procedure would be available for the manufacture of intermediate products also. The learned Counsel also referred to a number of rulings of the CEGAT and the Hon'ble High Court of Madras. It was further urged that the Tribunal in the case of Addison & Co. v. CCE reported in 1990 (48) E.L.T. 281 has taken the view that anti-rust and anti-corrosion oil applied to the goods in the last stage of manufacture as a preventive measure to prevent rusting and corrosion of the goods is "input" within the meaning of Rule 57A. It was further urged that apart from dipping serves the purpose of a protected cover to maintain lubrication to the required degree, it also prevents corrosion. The learned Counsel further urged that the cost of dipping process is also included in the cost of final product.
5. We have considered the submissions made before us. The learned Collector (Appeals) dealing with the issue in question has observed as under :-
"Only on the ground, that without the coating of the dipping compound, the delivery valves and elements are functional, the Asstt. Collector has held that the Ethyl Cellulose which goes into the manufacture of dipping compound, is not eligible to be considered as an input. But at the same time, she has herself, conceded the point that without the coating of this dipping compound, selling of the elements and delivery valves would be commercially inexpedient. As per the impugned order, the dipping compound provides the protective cover for element and delivery valves in order that while marketing the product, lubrication is maintained to the required degree. In other words, the coating of the dipping compound on the delivery valves and the elements is required for marketing the products and that without the said coating, it is commercially inexpedient to market them. Therefore, the appellant is very correct in placing reliance on the decision of the Hon'ble Supreme Court in Collector of Central Excise v. Eastend Paper Industries Ltd., reported in 1989 (43) E.L.T. 201 (SC). In fact the other decision of the CEGAT, namely 1990 (50) E.L.T. 172 (Tribunal) relied upon by the appellant has also referred to the said decision of the Supreme Court. The Supreme Court have held in the above said judgment "that where any particular process is so integrally connected with the element of production of goods, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process would fall within the expression 'in the manufacture of goods'". From the said view point and from the Asstt. Collector's own findings and observations in the impugned order, namely that the dipping compound provides the protective cover for element and delivery valves and also that without the said coating, it will be commercially inexpedient to sell the products, the Ethyl Cellulose, which goes into the manufacture of dipping compound has to be considered as an input. Further, Rule 57A, while explaining the scope of the word input, has mentioned the types of goods to be considered as inputs in the explanation provided in the said rule. There are certain types of goods which are excluded from being eligible to be called as inputs and I do not think that the Ethyl Cellulose comes into the category of the goods excluded. Hence, I hold that Ethyl Cellulose which goes into the manufacture of the dipping compound and which in turn is utilised for giving the coating to the delivery valves and elements, is eligible to be considered as an input in terms of Rule 57A of the Central Excise Rules, 1944. The role played by the dipping compound in the coating is also given in the impugned order and therefore there is no doubt that the Ethyl Cellulose goes into the manufacture of dipping compound and which in turn is utilised in giving the coating to the finished product therein."
We agree with the above reasoning of the learned Collector (Appeals) and further hold that the ratio of the ruling of the Supreme Court cited supra would be applicable on all fours to the facts of this case. The learned Collector in the impugned order has considered it not necessary to go into the issue as to whether the dipping compound can be considered an intermediate product or not for the benefit of Rule 57] of Central Excise Rules, 1944. We, therefore, for the reasons stated above hold that the impugned order is sustainable in law and on facts and in this view dismiss the appeal.