1990 (4) TMI 144 - AT - Central Excise

Summary

Issues Involved:
1. Whether inputs used in the making of sand moulds, which are used for making castings, can be considered as inputs used in the manufacture of steel castings for availing MODVAT credit under Rule 57A.
2. Whether sand moulds can be treated as intermediate goods for the purpose of availing MODVAT credit.
3. Applicability of Rule 57D in the context of sand moulds being treated as intermediate goods.

Issue-wise Detailed Analysis:

1. Inputs Used in Making Sand Moulds and MODVAT Credit under Rule 57A:
The primary issue is whether the inputs used in the making of sand moulds, which are subsequently used for making castings, qualify for MODVAT credit under Rule 57A. The lower authority held that inputs used in the manufacture of sand moulds are to be considered as used in relation to the manufacture of equipment or apparatus, which are specifically excluded from the purview of MODVAT credit under Rule 57A. The definition of "equipment" and "appliance" from the Concise Oxford Dictionary was cited to support this conclusion, emphasizing that sand moulds, even if used only once, fall under these categories and thus are not eligible for the credit.

2. Sand Moulds as Intermediate Goods:
The appellant contended that sand moulds should be considered as intermediary products in the manufacture of castings, and therefore, the benefit of input credit should be allowed. The Tribunal observed that the term "intermediate goods" is not defined in the Rules and must be understood in the trade context. Intermediate goods are generally those that emerge in the manufacturing stream and further processed to yield the final product. Sand moulds, independently prepared and not manufactured in the course of the finished product's manufacturing stream, do not qualify as intermediate goods. The Tribunal referenced definitions from Chambers' Dictionary and Concise Oxford Dictionary to support this interpretation.

3. Applicability of Rule 57D:
The appellant argued that under Rule 57D, inputs used for manufacturing intermediary products, which are exempt from duty, should still be eligible for MODVAT credit. The Tribunal, however, noted that sand moulds do not qualify as intermediate goods. They cited a previous decision in Andhra Pradesh Paper Mills v. Collector of C. Excise, Guntur, which emphasized that inputs must have a nexus with the production process integrally connected with the ultimate production of goods. Inputs used in machinery, equipment, or tools, which do not participate directly in the manufacturing process, are not eligible for MODVAT credit. The Tribunal concluded that the inputs used in sand moulds, being in the nature of tools or apparatus, are used in the manufacture of sand moulds and not in the manufacture of castings. Therefore, the appellants are not eligible for the benefit of Rule 57D.

Conclusion:
The Tribunal upheld the lower authority's decision, rejecting the appellants' plea for MODVAT credit on inputs used in the manufacture of sand moulds. The sand moulds do not qualify as intermediate goods, and the inputs used in their manufacture are considered used in relation to equipment or apparatus, which are excluded from the benefit of MODVAT credit under Rule 57A. The appeal was dismissed.