2001 (9) TMI 848 - AT - Central Excise

Summary

Issues involved:
Determining whether PE steel tubes and SS tubes cold drawn used as drill bars for tapping molten metal from blast furnaces are admissible inputs under Rule 57A.

Detailed Analysis:

1. Issue of Classification: The main issue in this appeal is the classification of PE steel tubes and SS tubes cold drawn used as drill bars for tapping molten metal from blast furnaces. The lower authorities considered these items as tools falling under the exclusion clause. However, the appellant argues that these items are not tools but are consumed during the manufacturing process and should be eligible for Modvat credit under Rule 57A and Rule 57H.

2. Evidence Presented: The appellants have provided photographs showing the drill bars used for tapping molten metal from blast furnaces. These drill bars are completely consumed during use, and new tubes need to be attached for the next tapping. The authorities below have not rebutted the appellant's contention that these tubes are used in relation to the manufacture of the final product.

3. Legal Precedent: Reference is made to the case of Rathi Udyog Ltd. v. CCE, Meerut, where the Tribunal held that items like grinding wheels can be eligible for Modvat credit under Rule 57A if they are not self-contained complete units capable of independent function. The judgment emphasized that the items must be used in or in relation to the manufacture of goods to qualify for Modvat credit.

4. Comparison with Grinding Wheels: The original adjudicating authority equated the tubes in question to the usage of grinding wheels in a grinding machine. The authority considered the tubes as detachable tools attached to the drilling machine, similar to how grinding wheels are used in grinding machines. Drawing parallels with the eligibility of grinding wheels for Modvat credit, the authority concluded that the tubes used with the drill bar should also be considered admissible inputs.

5. Larger Bench Decision: The Tribunal's decision in the case of Steel Strips Ltd. v. CCE, Chandigarh is referenced, where tundish nozzles used in the manufacturing process of final products were considered eligible inputs for Modvat credit under Rule 57A. The decision followed the Larger Bench decision in the case of Union Carbide India Ltd., emphasizing that exclusion clauses do not apply to parts of machines.

6. Conclusion: After thorough analysis and considering the evidence presented, it was held that the tubes in question are eligible modvatable inputs. The impugned orders were set aside, and the appeal was allowed with consequential relief to the appellants.