Customs, Excise and Gold Tribunal - Mumbai
Shree Marolivibhag Khand Udyog ... vs Collr. Of C. Ex. on 7 June, 1993
Equivalent citations: 1993(68)ELT700(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. All the 3 appeals involve in consideration of the same issue and hence they were taken up together for disposal. The appeals are directed against the following orders in appeal passed by the Collector of Central Excise (Appeals), Bombay.
Appeal No. E/746/92-BOM O/A No. KVV/54/92-BRD dt. 1-4-1992 Appeal No. E/80/92-BOM O/A No. KW/271/91-BRD dt. 25-10-1991 Appeal No. E/923/91-BOM O/A No. KVV/281/91-BRD dt. 25-10-1991 The issue involved is whether phosphoric acid added to the cane juice for purpose of meeting the deficiency of phosphate contents in the cane juice is eligible for modvat credit, in respect of payment of duty on the final product - crystal sugar.
2. Shri Doshi, the ld. Consultant appearing for the appellants, referred to this Bench decision in the case of Rahuri Sahakari Sakhar Karkhana Ltd. reported in 1993 (64) E.L.T. 501 (Tribunal) and pleaded that the present issue is squarely covered by the aforesaid decision and requested for allowing the appeals.
3. Shri Ravinder Jain, the ld. SDR, however, contended that the aforesaid decision has been given by a Single Member and there are Board's instructions to the effect that commercial sugar can be made even without usage of phosphoric acid. Hence, phosphoric acid used for the purification and whitening of sugar cannot be considered as an input necessary for the manufacture of sugar and hence no modvat credit is permissible thereon. In this connection, he referred to Trade Notice Nos. 81/90 dated 8-8-1990 and 40/91 dated 24-4-1991 issued by the Bombay Central Excise Collectorate. These Trade Notices are based on the Board's instructions, who, after considering the technical opinion, have come to the aforesaid view. He also submitted that natural cane also contains phosphoric acid and that would be adequate for phosphoric reaction in the commercial production of sugar and hence addition of phosphoric acid is not required for commercial production of crystal sugar. Hence, modvat credit cannot be extended.
4. We find the following facts as undisputed. Phosphoric acid is added to the cane juice, wherever cane was found to be deficient in natural P 205 content, so that sugar produced, out of such cane is whitened by clarifying the cane juice. Clarification of cane juice to the desired level is necessary for obtaining quality crystal sugar. It may be that in certain case, natural P 205 content in the sugarcane may be adequate for achieving the desired level of clarification of cane juice. But the fact of P 205 content occurring naturally in sugarcane is dependent on various factors such as the nature of the soil, climatic condition etc. Hence, traditionally phosphoric acid is added to cane juice, where natural P 205 content was deficient in the cane juice for attaining proper degree of clarification and whiteness of crystal sugar.
5. In the light of the above factual position as is noticed from the handbook of Cane Sugar Engineering by E. Hugot, we have examined the impugned order, presumably passed, on the basis of Board's instructions.
(i) The Assistant Collector holds that phosphoric acid is not an indispensable material for the commercial production of sugar and it is added only at times, where P 205 content is low in the cane juice. Hence, he considered it as not an input;
(ii) The Collector (Appeals) in the impugned order has held that the phosphoric acid is used as a tool or an appliance for bringing about a change in substance;
(iii) The Board's clarification is that commercial sugar can be made even without phosphoric acid and hence such acid used for purification and whitening of sugar cannot be considered as input necessary for the manufacture of sugar.
6. First we take up Assistant Collector's order. It is more or less on the lines of Board's instructions. We have considered the objection carefully. Mod-vat scheme does not restrict input duty relief only to essential raw materials or components. It is available to an item used in or in relation to the manufacture of the final product. The only restriction is that it is not to be an item of machinery/tool, appliance etc. Here the undisputed fact is that phosphoric acid is required to be added, wherever P 205 content is low in the cane juice for achieving whiteness of sugar. Hence, it is an input needed in the manufacture of the desired quality sugar. It is not the case of the Department that the appellants just throw away phosphoric acid in the cane juice for nothing. Since it is essentially needed for supplementing P 205 content in cane juice, wherever it is deficient, we are to rule out this objection.
7. As regards the observation of the Collector (Appeals) we cannot agree that it is a tool or appliance. It is a chemical added to the product mix for achieving proper clarification of cane juice. Hence it goes as an input for the clarification of cane juice. Hence we cannot appreciate the stand taken by the Collector (Appeals) that the phosphoric acid is a tool or appliance. We also carefully considered the Board's clarification referred to by the ld. JDR. Though production of crystal sugar may be possible without addition of phosphoric acid in these cases, where cane juice has the required P 205 content, in a case where the cane juice does not have the desired level of P 205 content and on account of that phosphoric acid is necessarily to be added for purpose of clarification, it cannot be dismissed as not an input. What is required to be established is whether in the context of its usage, it is necessary for bringing out the final product. Viewed in this context, the addition of phosphoric acid is a necessity and hence we could not agree with the clarification given by the Board. In view of the aforesaid discussions, we allow the appeals and direct the authorities below to restore the modvat credit.