Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Central Excise vs Mettur Chemicals And Industrials on 22 December, 1990
Equivalent citations: 1991(33)ECC64
ORDER
V.P. Gulati, Member
1. This appeal is filed by the Collector of Central Excise, Coimbatore against the order of the Collector of Central Excise (Appeals), Madras. The short point that falls for consideration in the appeal is whether Modvat Credit is available in respect of mercury used as cathode in the electrolytical process during the course of manufacture of caustic soda. The learned Collector (Appeals) has held as under:
I find that in view of the Government of India's order cited by the appellants, which are issued particularly for Modvat credit, the analogy of CEGAT'S order cited by the Assistant Collector in matter other than Modvat will not be applicable. As such, in the absence of any position finding than mercury is machinery and in view of the facts that electrodes are considered for availment of Modvat credit by the Government of India the appellants' grounds and acceptable and are accepted (sic).
2. The Revenue is in appeal against this finding of the Collector (Appeals). The Revenue in the grounds of appeal referred to the instructions of the Govt, of India which clarifies the earlier instructions issued in regard to the eligibility of the Modvat credit. The learned SDR has pleaded that as per earlier instructions Modvat facility can be extended to graphite electrodes and certain electrodes used in the manufacture of Iron and Steel products and aluminium respectively and similar concession was available for other electrodes, but as per Ministry's clarification issued vide letter F.No. B/21/32/87-TRU dated 23.9.87, the respondents were not eligible for the Modvat Credit in the present case. The thrust of the plea of the Revenue is that mercury is a part and parcel of Electrode; Cell (sic) and cannot be treated as consumable item and that being part of the equipment, it is no eligible for Modvat Credit. The learned SDR while reiterating the grounds of appeal pleaded that expenditure on purchase of mercury is shown by the Respondents in their balance sheet under heading "Capital expenditure" and therefore the Mercury could be treated as part of capital equipment.
3. Shri Sasidharan, the learned Counsel for the Respondents has pleaded that the Respondent had explained before the Assistant Collector that mercury acted as electrodes and was consumed during the course of manufacture. He has pleaded that as it is, this Tribunal in the case reported in [1990] 29 ECC 92 (SRB) : 1990 (28) ECR 423 in the case of Cominco Binani Zinc Ltd. has held that Aluminium sheets essentially required for the manufacture of unwrought zinc are eligible for Modvat Credit. He has pleaded that this decision of the Tribunal has been followed in another case reported in 1990 (30) ECR 458. He has pleaded that the East Regional Bench has also allowed Modvat Credit in respect of electrodes used in similar process in the case reported in 1900 (49) ELT 531 (sic).
4. We observe that the the mercury used by the Respondents as cathodes in the electrolytical process gets consumed and there is no rebuttal of this plea from the other side. This Bench of the Tribunal in the case reported in [1990] 29 ECC 92 (SRB) : 1990 (28) ECR 421 held as under:
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 in the 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 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 JK Cotton Mills Co. Ltd. v. Sales Tax Officer 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 of 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 (sic). This Tribunal in the case of Graphite Anodes has also held that Modvat credit is admissible for the same as inputs.
5. We observe that the Government of India also had at times opined that electrodes will be eligible for Modvat Credit. In view of above, we find no reason to depart from the above decisions and upheld the lower authority's order and we dismiss the appeal.