1995 (2) TMI 256 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for Modvat credit on Fire Bricks and Dead Burnt Magnesite used in the manufacture of steel.

Summary:

Issue 1: Eligibility for Modvat credit on Fire Bricks and Dead Burnt Magnesite
- The Department appealed against the order of the Collector (Appeals), New Delhi, which extended Modvat credit on Fire Bricks and Dead Burnt Magnesite, treating them as inputs for steel manufacture.
- The Department argued that these items are not consumable inputs, do not form part of the finished product, and require frequent replacement, thus forming part of machinery or equipment excluded from Modvat benefits u/s Explanation 1(b) to Rule 57A of the Central Excise Rules, 1944.
- The respondents contended that these items are consumable inputs used in the manufacture of steel, serving the same purpose as ramming mass, and should be eligible for Modvat credit.

Findings by the Tribunal:
- The learned DR conceded the applicability of the Calcutta High Court judgment in Singh Alloys & Steel Ltd. v. Assistant Collector of Central Excise, which held ramming mass as an input eligible for Modvat credit, to dead burnt magnesite. Therefore, the Tribunal confined its findings to the eligibility of Fire Bricks to Modvat.
- Fire Bricks are used in electric arc furnaces and undergo chemical reactions during steel manufacture, making them indispensable but not integral parts of the furnace.
- The Tribunal referenced the Calcutta High Court judgment in Singh Alloys, which held that items like dolopatch mix, magnesite peas, and ramming mass are inputs for steel ingots and not part of machinery, thus eligible for Modvat credit.
- Following this ratio, the Tribunal held that Fire Bricks should also be eligible for Modvat credit.

Separate Judgment by Member (Technical):
- Member (Technical) differed, stating the Calcutta High Court judgment specifically dealt with ramming mass, a chemical, and did not cover refractory bricks.
- Refractory bricks are essential parts of the furnace, used in constructing furnace walls, hearths, and roofs, making them integral to the furnace and thus excluded from Modvat coverage.
- The Member (Technical) proposed allowing the appeal of the Revenue and setting aside the impugned order regarding Fire Bricks.

Decision by Third Member (Technical):
- The third Member (Technical) agreed with the Member (Technical), holding that Fire Bricks are construction materials for the furnace, not consumable inputs for steel manufacture, and thus excluded from Modvat credit.
- The final order set aside the Collector (Appeals) order regarding Fire Bricks and allowed the Revenue's appeal on this issue, while upholding the Modvat credit on dead burnt magnesite.

Final Order:
- The impugned order of the Collector of Central Excise (Appeals), New Delhi, relating to Fire Bricks is set aside, and the appeal of the Revenue on this issue is allowed.
- The order extending Modvat credit on dead burnt magnesite is upheld, and the Revenue's appeal on this aspect is rejected.