Customs, Excise and Gold Tribunal - Tamil Nadu
Pratap Steels Ltd. vs Collector Of Central Excise on 27 June, 1991
Equivalent citations: 2000(117)ELT617(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This reference application arises out of the order of the Tribunal bearing No. 421/88, dated 27-7-1988. The Tribunal in their order have rejected the applicants plea for Modvat credit in respect of ramming mass, mortar and Carnex boards used for lining for the furnace and the ladles. The applicants are manufacturers of steel products and their plea was that ramming mass, mortar and Carnex boards were used in or in relation to the manufacture of the finished product under Rule 57A and the items are eligible for the benefit of Modvat credit. The Tribunal has taken note of the fact that ramming mass is used for maintenance of the Electric Arc Furnace and Carnex boards are insulating boards with exothermic properties and these boards are used in implements or media for transfer of liquid metal from the ladle to the casting machine moulds.
2. The learned Counsel for the applicants pleaded that the items were used in the applicants factory in or in relation to the manufacture of the final products and contended that the items used within the factory or on the machines or in the manufacturing process should be taken to have been used in or in relation to the manufacture of the final products.
3. The learned DR for the Department pleaded that the Tribunal has appreciated the facts of the use of the items and had come to the conclusion based the same. Therefore, no question of law can be stated to arise out of the findings of the Tribunal.
4. We observe that the Tribunal, in their order has made a distinction between the material used in the process and those which are used for maintenance of machinery and implements and have held that the materials used for maintenance of machinery and used as replacements cannot be taken to have been used in or in relation to the manufacture of the finished product. This Bench of the Tribunal in the case of Andhra Pradesh Paper Mills Ltd. in order No. 299/90, dated 4-4-1990 [1990 (50) E.L.T. 252 (Tribunal)]have held as under :
"So far as danday covers, wire netting and woollen felts are concerned, these are essentially parts of the paper making machinery and their use has to be held to be to keep the paper making machinery functional for the production of paper. While these participate in the manufacture of the end-product by being a part of the paper making machinery these by themselves do not participate in the process which are carried out in processing the materials which ultimately lead to the manufacture of paper. We observe that while allowing Modvat credit regard will have to be had to the purpose of the scheme i.e. to reduce cascading effect of the duty on the finished product by way of relief on the duty paid in respect of the goods which are used in or in relation to the manufacture of the finished product. The machineries, equipments and apparatus by themselves have been precluded from the benefit of the Modvat credit. Cascading effect of the duty paid on the machinery used in or in relation to the manufacture of the finished goods is not to be mitigated and as a corollory thereto the parts which are used in these machineries to make them functional also are not entitled to the benefit of Modvat Scheme. These parts which are used as replacement from time to time have to be held to have been used in relation to the machines themselves and not in relation to the manufacture of the goods. In the scheme of Modvat if the parts of the machines are included there is no reason why the lighting equipment and other structural fittings which are used in the factory in which the goods are produced would not have to. be allowed the benefit of the input duty relief under the Modvat Scheme. Going by the ratio of the judgment of the Hon'ble Supreme Court cited supra, it has to be concluded that the credit has to be allowed only in respect of such of those inputs which are used in the process of manufacture and which go directly into the manufacturing stream by themselves or are used in the manufacture of materials which go into the manufacturing stream resulting in the manufature of the end product. The parts of the machines which produce the finished goods do not pass this criterion and in that view of the matter we hold that the appellants have rightly been denied the Modvat credit in relation to chipper knives."
5. The West Regional Bench of the Tribunal has also taken a similar view.
6. We observe that what is to be taken as having been used in or in relation to the manufacture of a finished product depends on the facts of each case and the line to be drawn is whether materials used as in processing materials or for maintenance of the machinery or making any implements. The inputs used for the latter purposes have to be taken not to have been used in or in relation to the manufacture of the finished product but have to be considered for making the machinery and the implements etc. functional. The inputs in the present case are of such nature. In the above view of the matter, we, therefore, hold that no point of law arises for reference in this case and the reference application is rejected.