1990 (1) TMI 184 - AT - Central Excise

Summary

Issues Involved:
The appeal challenges the denial of MODVAT credit on Aluminium sheets used in the manufacturing process of unwrought zinc, based on the exclusion of equipment parts under Rule 57A of the Central Excise Rules.

Analysis of the Judgment:

1. Issue of MODVAT Credit Eligibility:
The appellants sought MODVAT credit for Aluminium sheets used in the electrolysis process for manufacturing unwrought zinc. The lower authorities denied the credit citing Rule 57A exclusion of equipment parts from the MODVAT Scheme.

2. Appellant's Argument:
The appellant's counsel argued that Aluminium sheets are essential in the manufacturing process, akin to Titanium Metal Anodes eligible for MODVAT credit. They contended that Aluminium sheets are specified inputs under Rule 57A and integral to producing unwrought zinc.

3. Revenue's Position:
The Revenue contended that since equipment is excluded under Rule 57A, parts of equipment, including Aluminium sheets, should also be excluded from MODVAT credit eligibility.

4. Judicial Analysis and Decision:
The Tribunal deliberated on whether Aluminium sheets were used in or in relation to the manufacture of zinc. It was acknowledged that Aluminium sheets function as cathodes in the electrolysis process and are eventually discarded as waste metal. The Tribunal noted that the exclusion under Rule 57A pertained to machinery and equipment, not raw materials like Aluminium sheets.

5. Legal Interpretation and Precedents:
Referring to the Supreme Court's ruling on goods used 'in the manufacture,' the Tribunal emphasized the broad interpretation of 'in or in relation to' the manufacturing process under Rule 57A. Drawing parallels with previous decisions on Graphite Anodes, the Tribunal concluded that Aluminium sheets qualify as inputs for MODVAT credit.

6. Final Verdict:
In alignment with the Supreme Court's interpretation and precedent set by the Tribunal, the appeal was allowed, granting the appellants the benefit of MODVAT credit for the Aluminium sheets used in the manufacturing of unwrought zinc.