1999 (2) TMI 616 - AT - Central Excise

Summary

Issues:
- Modvat denial on Lubricant Oil and Grease upheld by Order-in-Appeal.
- Interpretation of phrases "in the manufacture of goods" under Rule 57A and 57Q relating to Modvat.
- Contrary decisions in the matter of Modvat credit disallowance.
- Reference to High Court regarding Modvat credit entitlement for Lubricating oil.

Analysis:

1. Modvat Denial on Lubricant Oil and Grease:
The appeals challenged the denial of Modvat on Lubricant Oil and Grease as upheld by Order-in-Appeal No. 29/98. The issue revolved around the qualification of Lubricating oil and grease as inputs under Rule 57A. The appellant contended that previous decisions, such as in the case of J.K. Cotton Spinning and Weaving Mills Company, supported the eligibility of such inputs for Modvat credit, even if not directly involved in the manufacturing process but used in relation to the final product.

2. Interpretation of Phrases "in the manufacture of goods":
The advocate for the appellants referenced legal precedents, including the decision in the case of Shri Ramakrishna Steel Industries Ltd., to argue that even items like sand moulds could qualify for Modvat credit. The contention was that Lubricating oil and grease, being essential for reducing friction in machines and ensuring product quality, should be considered as inputs under Rule 57A. This argument was supported by previous tribunal decisions in cases like Pragati Paper Mills and Susheela Steel.

3. Contrary Decisions and High Court Reference:
The Junior Departmental Representative (JDR) highlighted a prior Final Order disallowing Modvat credit, leading to contradictory decisions in the matter. However, the advocate pointed out that a Reference filed against the final order was dismissed by the Tribunal, and the High Court of Andhra Pradesh had requested a review of the issue, specifically regarding Lubricating oil entitlement for Modvat credit. The advocate argued that the High Court's reference should prevail over the previous Tribunal order.

4. Judgment and Decision:
After considering the submissions and case records, the judge acknowledged the settled case law regarding Lubricating oil and grease as inputs under Rule 57A, as established in previous tribunal decisions. The judge emphasized the importance of maintaining consistency with established legal principles and overturned the Order-in-Appeal, allowing the appeals and granting consequential relief in accordance with the law. The decision was based on the role of Lubricating oil and grease in machine operations and their impact on the quality of the final product, aligning with the interpretation of phrases "in the manufacture of goods" under Rule 57A.