2004 (9) TMI 492 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit for lead sheets used in manufacturing process.

Analysis:
The appellants, who are manufacturers of Zinc and Sulphuric Acid, challenged the denial of Modvat credit for lead sheets used in lining the inner walls of pipes and equipment to prevent corrosion. They argued that lead sheets are essential inputs in the manufacturing process as they prevent corrosion in M.S. Tanks used in the leaching plant for zinc production. The appellants contended that without lead sheets, pipes would get damaged, leading to corrosion, making them necessary for the manufacturing of final products and thus eligible for Modvat credit.

The appellants' counsel cited precedents, including the case of Melton India Ltd. v. CCE, Meerut, where Boron Nitrate suspension was considered an input in the manufacture of metallized polyester films. The Tribunal in that case held that the substance participated in the manufacturing process and was eligible for credit. Another case referenced was Varalakshmi Sugars Ltd. v. CCE, Hyderabad, where Modvat credit was allowed for Slag Wool and Ceramic Fibre blankets used for lining pipes and equipment. The appellants argued that these judgments were applicable to their case, supporting their claim for Modvat credit for lead sheets.

On the other hand, the Revenue, represented by the SDR, maintained that the lead sheets were used for maintenance purposes and should not be considered as inputs eligible for Modvat credit. However, after considering the arguments from both sides and examining the manufacturing process involved, the Tribunal concluded that the lead sheets were indeed essential inputs for the manufacture of Zinc and Sulphuric Acid. The Tribunal noted that if lead sheets were not used to line the pipes, it could result in corrosion, emphasizing the necessity of these sheets in the manufacturing process.

Drawing parallels with the cases of Melton India Ltd. and Varalakshmi Sugars Ltd., where similar materials were considered inputs eligible for Modvat credit, the Tribunal ruled in favor of the appellants. The Tribunal held that lead sheets were not mere maintenance materials but integral inputs in the manufacturing process, deserving the benefit of Modvat credit. Consequently, the impugned order denying Modvat credit for lead sheets was set aside, and the appeals were allowed with consequential relief, if any, in favor of the appellants.