1990 (2) TMI 206 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 56A for availment of credit on certain chemicals used in the manufacture of explosives.
- Determining whether chemicals used for purifying water and marking explosives qualify as inputs for credit under Notification No. 201/79.
- Analysis of previous judgments by the Tribunal and Supreme Court on the definition of goods used in the manufacture of final products.

Issue 1: Interpretation of Rule 56A for credit on chemicals used in the manufacture of explosives
The appeal involved a dispute regarding the application of Rule 56A for availing credit on chemicals used in the manufacturing process of explosives. The appellants argued that their application was under Rule 56A and not under Notification 201/79. The Tribunal agreed with the appellants, emphasizing that Rule 56A does not require the goods to be raw materials but includes material or component parts necessary for the manufacture or distribution of specified goods. The appellants demonstrated how the chemicals were utilized in the manufacturing process, leading the Tribunal to conclude that the chemicals qualified as material required for the production of explosives.

Issue 2: Eligibility of chemicals for credit under Notification No. 201/79
The Collector (Appeals) had partially rejected the appeal, stating that certain chemicals used for purifying water and marking explosives did not qualify as inputs for credit under Notification No. 201/79. The appellants argued that the treated water was essential for the manufacturing process and for generating steam to prevent damage to boilers. The Tribunal agreed with the appellants, noting that the purification of water was integral to the manufacture of explosives. Additionally, the printing inks used for marking explosives and containers were deemed essential for the completion of the manufacturing process, making them eligible for credit under Rule 56A.

Issue 3: Analysis of previous judgments by the Tribunal and Supreme Court
The Tribunal referenced previous judgments by the Supreme Court to determine the eligibility of certain products as raw materials for the end-product. The Supreme Court's decisions highlighted the importance of essential presence and indispensability of a product in the manufacturing process. The Tribunal applied these principles to the current case, concluding that the chemicals used for treating water and marking explosives were essential for the manufacturing of explosives. Drawing parallels to a previous case involving sulphuric acid for water treatment in the manufacture of fertilizers, the Tribunal held that the chemicals used by the appellants for water treatment also qualified as materials required for the manufacture of explosives. Consequently, the appeal was allowed, granting the appellants consequential benefits.