1996 (11) TMI 96 - AT - Central Excise

Issues Involved:

1. Classification of Steel Balls (Grinding Media) under the Central Excise Tariff.
2. Eligibility for Modvat credit under Rule 57A of the Central Excise Rules, 1944.
3. Interpretation of "inputs" and exclusion clauses under Rule 57A.
4. Conflicting decisions of different benches of the Tribunal.

Issue-wise Detailed Analysis:

1. Classification of Steel Balls (Grinding Media) under the Central Excise Tariff:

The judgment discusses various classifications under both the old and new Central Excise Tariffs. Under the old Tariff, Steel Balls were considered "Steel Products" within the meaning of Tariff Item 26AA, specifically sub-item (v) which included "All other steel castings, not otherwise specified." The Tribunal noted that the decision in Electrosteel Castings Ltd. did not correctly interpret the language of Item 26AA(v) and incorrectly differentiated between "Steel Castings" and "parts of machines."

Under the new Tariff, the conflict was between Chapter 73 and Chapter 84. Chapter 73 covers "articles of iron and steel," and sub-heading 7326.11 includes "grinding balls and similar articles for mills." Chapter 84 deals with machinery and parts thereof, but Note 1(g) of Section XVI excludes parts of general use, which includes grinding balls. Therefore, Steel Balls fall under sub-heading 7326.11 and not Chapter 84.

2. Eligibility for Modvat credit under Rule 57A of the Central Excise Rules, 1944:

The judgment confirms that Steel Balls used in Ball Mills are "inputs" used in or in relation to the manufacture of cement, which is the final product. Rule 57A allows credit for duty paid on such inputs. The Tribunal emphasized that although Steel Balls are essential for the grinding process and some parts get mixed with the final product, they cannot be regarded as raw materials but are still considered "inputs."

3. Interpretation of "inputs" and exclusion clauses under Rule 57A:

The Tribunal examined whether Steel Balls fall under the exclusion clause (i) of the Explanation to Rule 57A, which excludes "machines, machinery, plant, equipment, apparatus, tools or appliances." It was determined that Steel Balls are not components or parts of the Ball Mill, nor are they accessories or tools. They are essential consumables for the Ball Mill to perform its grinding function. The Tribunal also noted that even if Steel Balls were considered parts of machinery, parts are not excluded by clause (i) based on the precedent set in Union Carbide India Ltd. v. Collector of Central Excise.

4. Conflicting decisions of different benches of the Tribunal:

The judgment reviewed various decisions by different benches of the Tribunal. It noted that earlier decisions, such as in M/s. Sriram Cement Works and Indian Rayon & Industries Ltd., correctly held that Steel Balls are not tools or equipment but "inputs." However, the decision in M/s. Associated Cement Co. Ltd. incorrectly classified Steel Balls as part of equipment and thus covered by the exclusion clause. The Tribunal clarified that the decision in Electrosteel Castings Ltd. was incorrect and that the decision in Magnetix (India) Ltd., which distinguished Steel Balls from parts of machinery, was also incorrect.

Conclusion:

The Tribunal agreed with the Collector (Appeals) that the respondent is entitled to Modvat credit for the duty paid on Steel Balls under Rule 57A of the Central Excise Rules, 1944. The appeal was dismissed, affirming that Steel Balls are "inputs" and not excluded by the exclusion clause (i).

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