2008 (1) TMI 198 - HC - Central Excise

Mfg. of Aluminium & articles thereof credit is allowed on Soderberg which is a paste & which an intermediate product essential for mfg. of aluminium, Non Ferric Alum used for recovering cryolite, M.S.Angles/Channels used for the fabrication of electrolytic, Oxygen gas, Acetylene gas, Electrodes, Welding wire, Pig iron, Transformer oil used as a coolant, Rodline and Alfloc used in boiler water for the preparation of softening watering these are used in or in relation to the mfg. of Aluminium

Summary

Issues:
1. Interpretation of Rule 57A of the Central Excise Rules regarding the credit of duty on certain items.
2. Validity of declarations under Rule 57Q for entitling the assessee to credit under Rule 57A.

Analysis:
1. The primary issue in this case revolves around the interpretation of Rule 57A of the Central Excise Rules concerning the credit of duty on specific items used in the manufacturing process. The contention raised by the revenue was that certain items, like Hydrochloric Acid (HCL), were not directly related to the manufacturing of the final product. However, referencing the Supreme Court's decision in the Indian Farmers Fertiliser Co-operative Ltd. case, it was established that items used in treating effluents, such as HCL, are integral to the manufacturing process and thus qualify for credit.

2. Another significant issue addressed in the judgment pertains to items used in the production of Soderberg paste, which is an essential component in the manufacture of Aluminium. The revenue argued that since the electrolytic cell did not qualify as a final product, the items used for the paste were not eligible for credit. However, based on the factual finding that the Soderberg paste is crucial in the Aluminium manufacturing process, the Tribunal approved the assessee's entitlement to credit, citing a previous case in favor of the assessee.

3. The judgment further delves into the eligibility of Non-Ferric Alum for credit, which was used for cryolite recovery and water treatment. The department contended that Non-Ferric Alum did not directly contribute to the final product's manufacture. Drawing parallels to the Supreme Court's decision in the Indian Farmers Fertiliser Co-operative Ltd. case, the judgment concluded that the Alum's usage for essential purposes related to the manufacturing process qualified for credit under Rule 57A.

4. Additionally, the judgment addressed various items like M.S. Angles/Channels, oxygen gas, acetylene gas, electrodes, welding wire, pig iron, transformer oil, Rodline, and Alfloc, analyzing their eligibility for Modvat credit under Rule 57A. The Tribunal's decisions were largely influenced by previous legal precedents and factual findings supporting the assessee's entitlement to credit for items used directly or indirectly in the manufacturing process.

5. Ultimately, the High Court dismissed the Reference Case Petitions, finding no substantial question of law to warrant Tribunal intervention, thereby upholding the decisions regarding the interpretation and application of Rule 57A in the context of the Central Excise Act.