Customs, Excise and Gold Tribunal - Mumbai
Gujarat Alkalies And Chemicals Ltd. vs Collector Of C. Ex. on 7 February, 1989
Equivalent citations: 1989(20)ECC117, 1989(41)ELT424(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. Both the aforesaid appeals arise out of the Order of the Collector (Appeals) bearing No. V-2(28 CETA) 1913/87 3548, dated 1-3-1988.
2. Brief facts for the purpose of disposal of these appeals can be stated as below:
3. The appellants M/s Gujarat Alkalies & Chemicals Ltd. are the manufac turers of caustic soda lye through the processing of electrolysis. In the process of electrolysis, they use Coated Titanium Metal Anodes. They claimed the credit of duty paid on this under the MODVAT scheme. The Assistant Collector, while allowing the credit of duty paid on Graphite Anodes totally disallowed the credit of duty paid on Coated Titanium Metal Anodes. The matter was taken before the Collector (Appeals). The Collector (Appeals) held that the noble metal coating on the metal anodes is eligible for MODVAT credit since it gets consumed in the process, whereas hard core of the metal which is not getting consumed will not be eligible for MODVAT credit. Against this Order both the department as well as M/s Gujarat Alkalies & Chemicals Ltd. filed the present appeals. M/s Gujarat Alkalies & Chemicals Ltd. contended that they are eligible for the MODVAT credit in respect of the entire anodes and it is not restricted to noble metal coated as held by the Collector (Appeals), whereas the department has come in appeal that even the noble metal coated on the anodes is not eligible for MOD VAT credit and the Order of the Assistant Collector rejecting the claim for MODVAT credit on this item was therefore sought to be restored.
4. Shri D.M. Mehta, on behalf of the appellant M/s Gujarat Alkalies & Chemi cals Ltd. (GACL) contended that as per Section 37 of the Central Excises and Salt Act, 1944 as amended by the Finance Act, 1986 the Rules are to provide for the credit of duty paid or deemed to have been paid on goods used or in relation to the manufacture of ex cisable goods. In pursuance of this Sub-section to Section 37, Rule 57-A has also adopted the same language and same wording. According to Rule 57-A, goods used in the manufacture or in relation to manufacture are to be treated as inputs. By way of explana tion to that Rule inputs are those which are used in the manufacture or in relation to manufacture should include paints and packing materials but does not include machines, machinery, plants, equipments, apparatus, tools or appliances used for producing or processing of any goods or for bringing out any change in any substance or in relation to manufacture of final products. The exclusion also covers packing materials of certain categories. The contention of Shri Mehta is that Titanium Metal Anode does not fall under any of the excluded category given in the explanation to Rule 57-A. It was also his submission that Titanium Metal Anodes is only a metal substitute for Graphite Anodes, the only difference being that Titanium Anodes stay for longer duration as compared to Graphite Anodes. When the department has not challenged the findings of the Assis tant Collector extending the MODVAT benefit in respect of Graphite Anodes, which also performs identical function there is no justification for challenging the extension of MODVAT credit in respect of Titanium Anodes. He also cited the decision of the CEGAT Special Bench in the case of departmental appeal filed against Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd., reported in 1988 (35) ELT 227 (Tribunal). While interpret ing Notification No. 201/79-C.E., with regard to the very same product, the Tribunal have held that these can be regarded as an input used in the manufacture and rejected the department's appeal. He, therefore, contended that the very same issue which has al ready been decided by the Special Bench with regard to the Notification No. 201/79 C.E., with regard to the same product is now being agitated. In case of MODVAT credit the provisions are more liberal than the restrictive ones in Notification No. 201/79. He, therefore, contended that even going by this judgment of the Tribunal, the Order of the Collector (Appeals) restricting the extension of MODVAT benefit only to the noble metal coated is unjustified. The credit should be given to the duty paid on the entire coat ing metal. On the same ground he also seeks for rejection of the departments appeal for restoration of the Order of the Assistant Collector rejecting their claim for MODVAT credit for this item as a whole.
5. Heard Shri Arya. Shri Arya contended that these goods are more in the na ture of consumable tools. They are not going in the mainstream of manufacturer to be called as input. He, however, concedes that these Anodes are consumed in the process but after a longer duration. According to the department, these are more in the nature of fixed plant item. This can be called as replacable Capital Goods and hence cannot be equated with consumable items deserving the extension of MODVAT credit. He also contended that under Rule 57-A, Capital Goods are specifically excluded. Since this is only a replacable plant item MODVAT credit should not be extended.
6. Shri Mehta contended that even with regard to replacable consumable item of apparatus like Pyrometer tips, MODVAT has been extended and in this connection he referred to letter No. 211/85/86-CX.6 dated 17-7-1987 of the Central Board of Excise and Customs reproduced in 1988 (33) ELT Part II Page T-21. According to this Board's direction, Pyrometer tips which are used as part of an apparatus called Pyrometer for measuring the temperature of molten iron-steel etc. should also be given the benefit of MODVAT credit.
7. After hearing both sides and perusing the available records the questions to be decided in this case are whether :-
(i) Titanium Metal Anodes comes under the excluded category of items given in the explanation to Rule 57-A.
(ii) Whether the Tribunal's Special Bench decision in regard to the Notifica tion No. 201/79 on the very same item would be applicable in the context of MODVAT credit.
8. Anodes are necessary in the elecrolysis process for the manufacture of caus tic soda lye. These anodes can be of Graphite or Titanium Coated Metal Anodes, which is reported to be a better substitute. The difference is that in the case of Graphite Anodes they get consumed quickly in the process and need frequent replacement in a span of three to six months. In the case of Titanium Metal Anodes the noble metal portion gets consumed in the process and they are coated periodically but in any case, even the recoat ing can be done only twice or thrice and not beyond that. In any case, there is no dispute that it is essentially required in the manufacture of caustic soda lye and also in that view it is used in relation to the manufacture of caustic soda lye. The question whether some part gets consumed or can be permanent becomes relevant only for interpreting whether they come under the excluded category. There is no mention in the Rule that only that item which gets consumed in the process can be called as inputs. The excluded category are machines, machinery, plants, equipments, apparatus, tools or appliances. We are un able to appreciate that Anodes come under any of these items in the excluded category. It cannot be called as a machinery, plant or equipment or apparatus. The departments contention is that it is a fixed plant item. But there is no explanation from the depart ment as to how it becomes a plant or machinery. Shri Arya has urged that it is in the na ture of a consumable tool bit of an appliance. Even in regard to tool bits, items like Pyrometer tips, MODVAT credit have been extended as pointed out from the other side.
When Graphite anodes are held to be eligible for MODVAT credit, an item perform ing the same function cannot be denied that benefit merely because it stays for a longer duration. In our view they do not get excluded under the explanation to Rule 57-A. Moreover, the Order of the Collector (Appeals) that only noble metal coated is to be given MODVAT credit, can only remain on paper because Titanium Metal Anodes ac quired by them would only be such a coated anode and duty element would not be avail able separately for the noble metal coating thereon. Moreover, the c6ncept of MODVAT envisages taking of the credit as indicated in the gate pass or the relevant ap proved duty payment documents. Hence taking of a notional credit in the absence of a Notification specifically laying down this amount is beyond the purview of MODVAT scheme as laid down in the Rules. Hence on this ground also the Order of the Collector (Appeals) confining the credit only to the noble metal coating is required to be set aside.
9. But the question raised in the department's appeal is not on this ground but to deny the credit for the entire Titanium Anodes. For the reasons stated and discussed earlier, we are of the view that Titanium Anode is not sought to be excluded under the explanation to Rule 57-A. Hence the duty paid on entire anodes is eligible for MOD VAT credit. While taking this view, we also find support in the citation made by Shri Mehta in the case of Collector of Central Excise, Indore v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. reported in 1988 (35) ELT 227 (Tribunal). In this case, the item covered is the same one and usage also is for manufacture of caustic soda lye. The decision is with regard to the Notification No. 201/79-C.E. where benefit is given in respect of duty paid inputs used in the manufacture as raw material or components. In the case of MODVAT credit, no such restriction of usage as raw material or components is prescribed. Even use in relation to manufacture is permissible so long as it does not get excluded by the explanation. Even in a restricted context under Notification No. 201/79-C.E., the Spe cial Bench has taken the view that this item can be regarded as input and is eligible for exemption under Notification 201/79. Hence we are fortified that in the liberalised con text of MODVAT Rules without restriction of usage as raw material or component, there is no justification for denying the MODVAT credit in regard to this item. Accordingly, while allowing the appeal filed by M/s Gujarat Alkalies & Chemicals Ltd., we dismiss the appeal filed by the Collector of Central Excise, Vadodara.