1990 (12) TMI 253 - AT - Central Excise

Summary

Issues:
- Denial of MODVAT Credit for Oxygen and Acetylene Gas used in the manufacture of specified finished product under Rule 57A.
- Interpretation of whether Oxygen and Acetylene Gas qualify for MODVAT Credit.
- Consistency of decisions by different benches of the Tribunal regarding MODVAT Credit for Oxygen and Acetylene Gas.
- Determination of the eligibility of Oxygen and Acetylene Gas as inputs for the tool or as consumable gases.

Analysis:

The appeal challenged the denial of MODVAT Credit for Oxygen and Acetylene Gas used in manufacturing a specified finished product under Rule 57A by the Collector of Central Excise (Appeals), Madras. The Collector held that these gases do not merit MODVAT Credit as they are used in a cutting torch, which falls under the excluded category of inputs under Rule 57A. The appellants argued that previous decisions by the Tribunal and the East Regional Bench, Calcutta allowed MODVAT Credit for similar circumstances, indicating inconsistency in the interpretation of the rule.

The Tribunal referred to its previous decisions, including one in the case of M/s. Steel Industries Kerala Ltd., where it held that inputs would be eligible for MODVAT Credit if used in or in relation to the manufacture of the end-product. Additionally, the East Regional Bench and a trade notice from the Calcutta Central Excise Collectorate supported the eligibility of MODVAT Credit for Oxygen and Acetylene gases used for cutting and welding purposes. This highlighted the need for a consistent approach in interpreting the rule across different benches.

The West Regional Bench, Bombay, in the case of Mukund Iron and Steel Works Ltd., analyzed whether Acetylene Gas could be considered an input for the tool or a consumable gas. The bench concluded that Acetylene Gas, when used in conjunction with Oxygen Gas in a torch to produce Oxyacetylene gas for metal cutting, qualifies as an input required for producing a flame of high temperature, essential in the manufacturing process. This interpretation supported the appellants' claim for MODVAT Credit for Acetylene Gas.

Based on the above analysis and consistent with previous decisions, the Tribunal held that the appellants' plea for MODVAT Credit for Oxygen and Acetylene Gas is maintainable in law. However, the Tribunal clarified that MODVAT Credit should only be granted for the quantity of gases used in or in relation to the manufacture of the specified product, not for other purposes in the factory. Consequently, the appeal was allowed on these terms, affirming the eligibility of Oxygen and Acetylene Gas for MODVAT Credit in the specified manufacturing process.