1990 (5) TMI 128 - AT - Central Excise

Summary

Issues:
- Eligibility of Modvat credit for various items used in or in relation to the manufacture of cement.
- Interpretation of the expression "used in relation to the manufacture" in Rule 57A of the Central Excise Rules.
- Comparison of provisions under Central Sales Tax and Modvat Scheme regarding the eligibility of goods for credit.
- Application of precedents and judgments in determining the eligibility of goods for Modvat credit.

Analysis:
The appeal was filed by M/s. Associated Cement Companies challenging the order of the Collector of Central Excise (Appeals) rejecting their claim for Modvat credit on various items used in or in relation to the manufacture of cement, except for grinding medic. The appellants argued that the goods satisfied the criteria under Rule 57A and should be eligible for Modvat benefit. They cited the Supreme Court judgment in M/s. J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer to support their contention that goods used in the manufacture of intermediate products should also qualify for Modvat credit. They listed items like diesel oil, explosives, refractory bricks, and iron & steel castings as essential for cement manufacture and eligible for Modvat credit.

The arguments presented by both sides were considered by the Tribunal. The Tribunal analyzed the Supreme Court judgment in J.K. Cotton Spinning & Weaving Mills Co. Ltd. and emphasized the distinction between goods used in or in relation to the manufacture of finished products and excluded items like machinery and equipment from Modvat benefit. The Tribunal noted that consumables must be used in or in relation to the manufacture of finished products to qualify for Modvat credit. The Tribunal also referred to previous decisions where inputs used indirectly or directly in the manufacture of finished products were deemed eligible for exemptions.

Based on the analysis, the Tribunal found that the goods listed by the appellants, such as items for quarrying, maintenance, repair, and transportation, were not directly related to the manufacture of cement but rather for maintenance purposes. Goods used for maintenance of structures, equipment, and machinery were deemed ineligible for Modvat credit. The Tribunal concluded that the denial of Modvat credit on such goods was justified, and the appeal was rejected. The decision was announced in court on 17-04-1990.