1990 (1) TMI 215 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of modvat credit for chemicals used in the preparation of sand moulds.
2. Classification and marketability of sand moulds.
3. Applicability of Rule 57(A) and Rule 57(C) of the Central Excise Rules.
4. Interpretation of sand moulds as intermediate products under Rule 57(D).

Issue-wise Detailed Analysis:

1. Eligibility of Modvat Credit for Chemicals Used in the Preparation of Sand Moulds:
The appellants sought modvat credit for duty paid on chemicals used in preparing sand moulds for casting. The department objected, arguing that these inputs were used in the preparation of sand moulds, which are considered equipment. Rule 57A's explanation excludes machinery, equipment, and apparatus from modvat credit eligibility. The department also argued that sand moulds are final products classified under sub-heading No. 8480.00 of the Central Excise Tariff and are exempt from duty under Notifications Nos. 220/86 and 381/86, thus making the inputs ineligible for credit under Rule 57(C).

2. Classification and Marketability of Sand Moulds:
The appellants contended that only shell sand moulds could be considered marketable, while green sand and cold setting sand moulds are unstable and not marketable. They argued that, as per Rule 57(A), final products must be finished excisable goods. Since the moulds are not marketable, they cannot be considered goods or final products, making Rule 57(C) inapplicable. The department countered that the sand moulds are equipment used in manufacturing castings, and the chemicals used are inputs for the moulds, not the castings.

3. Applicability of Rule 57(A) and Rule 57(C) of the Central Excise Rules:
The Tribunal focused on whether the inputs used in sand moulds are eligible for modvat credit under Rule 57(A). It was noted that Rule 57(A) allows credit for duty paid on inputs used "in or in relation to the manufacture of the notified final product," but excludes machinery, equipment, and apparatus. The Tribunal concluded that sand moulds, being equipment, fall under this exclusion, thus making the inputs used in their preparation ineligible for modvat credit. The Tribunal did not find it necessary to consider the marketability of the moulds or their classification as finished excisable goods under Rule 57(C).

4. Interpretation of Sand Moulds as Intermediate Products Under Rule 57(D):
The appellants alternatively argued that sand moulds should be considered intermediate products eligible for modvat credit under Rule 57(D), which allows credit even if intermediate products are exempt from duty. The Tribunal rejected this argument, stating that sand moulds are independently manufactured and do not occur at an intermediate stage in the production stream of the final product (castings). Therefore, they cannot be considered intermediate products under Rule 57(D).

Conclusion:
The Tribunal dismissed the appeals, upholding the department's view that inputs used in sand moulds, which are considered equipment for casting, are not entitled to modvat credit. The demands made by the department were deemed enforceable.