2003 (5) TMI 58 - SC - Central Excise

Cenvat/Modvat Credit - Whether on the facts and in the circumstances of the case the appellate Tribunal is right in law in holding that the applicants are not eligible to Modvat Credit in respect of Ramming Mass Fibre glass and filter mesh used in or in relation to the manufacture of pistons on the ground that they are covered under Proviso to Rule 57A of the Central Excise Rules. - Held that - In order to appreciate the controversy the relevant facts are that the assessees claimed benefit of Modvat credit in respect of Ramming mass Fibre glass and Filter mesh. These items are used in the process of manufacture of steel and without the use of these items the end product cannot be produced. The assessees in these cases are engaged in the manufacture of items of steel like pistons in the Escort s case. The manufacture takes place in electric arc furnace refractories. It is submitted on behalf of the assessees that during the course of manufacture steel is melted at a very high temperature. Steel produces acidic vapours when melted at such a high temperature. To contain the vapour and neutralise them chemicals like dolomite or magnesite are used during the course of manufacturing process. Ramming Mass fibre glass and filter mesh are processes in which chemicals are used to line the furnaces to neutralise the effect of acidic vapours produced during the course of melting steel. Unless these chemicals are used the furnace may burst - Manufacturing process being the same in these cases we hold that the assessees are entitled to Modvat credit on Ramming Mass Fibre glass and filter mesh - Decided against Revenue.

Summary

Issues:
Appeal against Karnataka High Court judgment under Section 35(G) of Central Excises and Salt Act, 1944 regarding eligibility for Modvat Credit on certain items used in manufacturing pistons.

Analysis:
The appeals were filed against the Karnataka High Court judgment regarding the eligibility for Modvat Credit under Section 35(G) of the Central Excises and Salt Act, 1944. The question at hand was whether the applicants were entitled to Modvat Credit for Ramming Mass, Fibre glass, and filter mesh used in the manufacture of pistons. The assessees claimed that these items were essential inputs in the manufacturing process of steel items like pistons. The process involved using chemicals like dolomite or magnesite to neutralize acidic vapors produced during the steel manufacturing process. Without these chemicals, the furnace might burst, making them crucial for the manufacturing process.

In support of their contention, the assessees referred to a book on Electric Furnace Steel Making, highlighting the importance of using basic materials like lime to remove undesirable elements like phosphorus and sulfur from the melt during steel manufacturing. The book emphasized the need for a basic refractory-lined container, such as dolomite or magnesite, to prevent excessive corrosion of the refractory lining due to acidic materials. Based on this manufacturing process and the necessity to control acidic vapors, a previous judgment (C.A. No. 6615/2003) had upheld the essentiality of using chemicals like burnt dolomite in the steel manufacturing process to neutralize acids and prevent damage to the furnace.

Considering the similarity in the manufacturing processes involved, the bench concluded that the assessees were indeed entitled to Modvat Credit on Ramming Mass, Fibre glass, and filter mesh. Therefore, the appeals were dismissed with no order as to costs, affirming the assessees' eligibility for Modvat Credit on the mentioned items crucial for the steel manufacturing process.