Customs, Excise and Gold Tribunal - Tamil Nadu
Cominco Binani Zinc Ltd. vs Collector Of Central Excise on 2 January, 1990
Equivalent citations: 1990(29)ECC92
ORDER
Gulati V.P., Member
1. This appeal is against the order of the Collector of Customs and Central Excise (Appeals), Madras. Brief facts are that the appellants are manufacturing unwrought zinc and in the process of manufacture use aluminium sheets in the electrolysis process. The aluminium sheets after use were discarded and sold as scrap. The appellants availed of MODVAT credit in respect of the aluminium sheets to the extent of Rs. 85,132.18. The appellants were called upon to pay the amount of credit taken. The lower authorities have held that in terms of Rule 57A of the Central Excise Rules, the appellants were not eligible for the benefit of MODVAT credit of the duty paid on the aluminium sheets, for the reasons that under Rule 57A(1) aluminium sheets were part of the electrolysis equipment and since equipments were not covered by MODVAT Scheme being excluded for this purpose under Rule 57A, parts of the same were also not eligible (sic).
2. The learned Counsel for appellants pleaded that aluminium sheets are used as cathodes in the electrolysis process for production of the unwrought zinc and the appellants took the credit after filing necessary declaration. He pleaded that the goods were used in relation to the manufacture of Zinc. He pleaded that as it is aluminium sheets are an essential item as in the case of titamium metal anodes required for manufacture of caustic soda lye which have been held to be eligible for MODVAT credit vide WRB decision in the case of Gujarat Alkalies and Chemicals Ltd. v. CCE following the ratio of the Special Bench decision . He pleaded that aluminium sheets were specified inputs under Rule 57A and unwrought zinc is also a specified final product.
3. Shri KM Vadivelu, the learned D.R. appearing for the Revenue pleaded that since equipments were excluded from the purview of Rule 57A under the MODVAT Scheme, the parts of equipments should also be taken to be excluded for the purpose of MODVAT credit.
4. The short point that falls for consideration is whether aluminium sheets can be taken to have been used in or in relation to the manufacture of zinc. It is an agreed position that aluminium sheets are used in the electrolysis process as cathodes and after use for some time these are discarded as waste metal and sold as such. It is not pleaded that the aluminium sheets used for manufacture of unwrought zinc can be considered as an equipment by itself. It is seen that aluminium sheets are used in the manufacturing process and after use for some time these have to be discarded as waste metal. Framers of the Rule, it is observed, have chosen to exclude certain categories of goods under Rule 57A for the purpose of MODVAT Scheme and the goods excluded are such which have to be in the nature of machines, machinery, plant, equipment, apparatus, tools or appliances. The Plea of the Revenue is that aluminium sheets are parts of equipments and since equipments are excluded, parts of the same should also be taken to be excluded. No legal basis has been urged for this plea and there is no warrant to read the parts into the description of excluded category of goods under Rule 57A. No rule has been cited by the Revenue in support of this plea. It is observed that aluminium sheets are an essential requirement in the electrolysis process and these have to be replaced from time to time after they lose their utility and the waste is sold as scrap. Use of aluminium sheets is directly in the manufacturing process and since these cannot be treated as equipment by itself, use of the same has to be taken to be in relation to the manufacture of the specified final product under Rule 57A as in the case of titanium metal anodes in respect of which MODVAT credit has been held to be admissible. It is observed that the term "inputs" used under Rule 57A has a wider import. Aluminium sheets used being not equipment as such and since these participate in the manufacturing process, have to be taken to be covered by the provisions of Rule 57A for grant of MODVAT credit. The Hon'ble Supreme Court in the case of J.K. Cotton Mills Co. Ltd v. Sales Tax Officer, (V C 213) examined the scope of the term goods used "in the manufacture" in the context of Rule 18 framed in the context of Section 13 of the Central Sales Tax Act, 1956, [and] has held as under:-
The goods referred to in Clause (b) of Sub-section (3) of Section 8, which a registered dealer may purchase shall be goods intended for use by him as raw materials, processing materials, machinery, plant equipment, tools, stores, spare parts, accessories, fuel or lubricants in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.
In view of the wide amplitude of the word "in or in relation" to the manufacture of specified finished product under Rule 57A, it can be said in the light of the judgment of the Hon'ble Supreme Court that aluminium sheets are used in relation to the manufacture of the goods which are specified products covered by the Notification issued under Rule 57A of the Central Excise Rules. This Tribunal in the case of graphite anodes has also held that MODVAT credit is admissible for the same as inputs. Following the ratio of the Hon'ble Supreme Court ruling as also that of this Tribunal, we hold that the appellants are eligible for the benefit of MODVAT credit as availed of by them, and we allow the appeal.