2005 (10) TMI 191 - AT - Central Excise

Summary

Issues:
Modvat credit denial for Low PH (Acidic Water) and Scale Forming Deep Tubewell Water used in steam generation for manufacturing petroleum products.

Analysis:
The appellants contested the denial of Modvat credit for the inputs used in generating steam for manufacturing petroleum products. The adjudicating authority based its decision on the premise that the inputs were not directly or indirectly used in the refinery for manufacturing petroleum products, citing a previous Tribunal decision. However, the appellants argued that the inputs were indeed used in steam generation, which was subsequently utilized in manufacturing the final products in the refinery.

The appellants highlighted a contradictory decision by a Larger Bench of the Tribunal in a different case, which deemed the Tribunal's previous decision as not valid. They also referenced a Supreme Court ruling to support their claim. On the other hand, the Revenue contended that the inputs were not directly used in the final product manufacturing process, reiterating the adjudicating authority's findings.

Upon examination, it was established that the inputs were unquestionably utilized in steam generation within the refinery, a fact not disputed by the Revenue. The steam generated was further employed in the manufacturing of petroleum products. The Tribunal noted the overruling of the previous decision by the Larger Bench and referenced a Supreme Court case involving ammonia production to support the appellants' position. The Tribunal concluded that since the inputs were integral to the steam generation process, which directly contributed to the final product manufacturing, the denial of Modvat credit was deemed unsustainable and was overturned, thereby allowing the appeal.

In summary, the Tribunal's decision reversed the denial of Modvat credit for the inputs used in steam generation for manufacturing petroleum products, emphasizing the direct link between the inputs and the final product manufacturing process, as established through relevant legal precedents and the specific utilization of the inputs within the refinery operations.