1992 (3) TMI 178 - AT - Central Excise

Summary

Issues: Modvat credit on lead used in galvanization process

Analysis:
The appeal was filed against the Order-in-Appeal No. 4/CE/IND/91, challenging the denial of Modvat credit on lead used in the galvanization process of the final product. The main issue revolved around whether lead qualifies as an input for Modvat credit under Rule 57A of the Central Excise Rules, 1944. The Assistant Collector contended that lead was not consumed in the manufacturing process and thus not eligible for the credit. The appellants argued that lead, along with zinc, was used in galvanization and should be considered an input as per the relevant notifications and rules.

The appellant's counsel, Shri Satya Sheel, emphasized that lead was indeed consumed in the galvanization process of M.S. steel products, citing technical literature to support this claim. He argued that as long as inputs are used in or in relation to the manufacture of final products, they should qualify for Modvat credit. The counsel relied on various legal precedents to strengthen their argument regarding the eligibility of lead for Modvat credit.

On the other hand, the Revenue's representative, Shri Rakesh Bhatia, supported the reasoning in the impugned order, stating that lead primarily served as an aid in the galvanization process and did not qualify as a direct input under Rule 57A. The Collector (Appeals) had highlighted that lead's role was more akin to a lining material for the galvanization bath.

After considering the arguments from both sides and reviewing the records, the Tribunal concluded that for an item to qualify as an input for Modvat credit, it must be used in or in relation to the manufacturing process, without the necessity of being present in the final product or completely consumed. The Tribunal highlighted that if lead was used in the manufacturing process, it should be eligible for Modvat credit as per the Explanation to Rule 57A. The Tribunal also noted that the exclusion of specific items from the Modvat benefit needed to be explicitly stated in the rules or notifications. In light of these considerations and the supporting legal precedents cited by the appellant, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellants.