2004 (2) TMI 609 - AT - Central Excise

Summary

Issues:
Grant of Modvat credit for "Rigid Polyurethane Foam Section" used as an insulator in the Cell House of the chlorine plant.

Analysis:
The Appellate Tribunal CESTAT, Chennai addressed the issue of Modvat credit for the "Rigid Polyurethane Foam Section" used as an insulator in the Cell House of the chlorine plant. The Order-in-Appeal had confirmed the rejection of the appellant's prayer for Modvat credit, stating that the item cannot be considered as an accessory to the Cell House and is not covered under Rule 57Q as capital goods. The authorities disallowed a credit of Rs. 21,354 under Rule 57H of Central Excise Rules, asserting that the item is used to maintain low temperature in the chlorine line of the Cell House for the manufacture of caustic soda. The appellant argued that the item is essential for manufacturing caustic soda as it helps in maintaining the required temperature in the chlorine cell.

The appellant's counsel referred to various judgments to support their case. They cited the case of CCE v. Winsome Spinners Ltd., where Modvat credit was granted on fiber glass used for insulation of ducts, emphasizing that the item in question performs a similar essential function in the final product. The counsel also relied on judgments such as CCE v. Surya Roshini, SIV Industries Ltd. v. CCE, Grasim Industries v. CCE, and Reckitt Benckiser (India) Ltd. v. CCE to strengthen their argument for granting Modvat credit for the insulating material.

After considering the arguments and precedents cited, the Tribunal observed that there was no dispute regarding the use of the insulating material to reduce temperature in the chlorine cell for manufacturing caustic soda. Referring to previous judgments, the Tribunal noted that insulating materials essential for the final product had been granted Modvat credit in similar cases. Citing the cases of Winsome Spinners Ltd. and Grasim Industries, the Tribunal concluded that the appellant's claim for Modvat credit on the insulating material should be accepted. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.