1992 (10) TMI 162 - AT - Central Excise

Summary

Issues Involved:

1. Eligibility for Modvat Credit on Resins used in Sand Moulds for manufacturing castings.
2. Time-limit for demand beyond six months.

Issue-wise Detailed Analysis:

1. Eligibility for Modvat Credit on Resins used in Sand Moulds for manufacturing castings:

The appeals by M/s. Hindustan Motors Ltd. and the Collector of Central Excise, Calcutta-II, arose from an order which held that the appellants were not eligible for Modvat Credit on Resins used in the manufacture of Sand Moulds, which were used for producing castings for motor vehicle parts. The Assistant Collector's initial finding, upheld by the Collector (Appeals), was that Sand Moulds, though used only once, are equipment/apparatus/appliances by means of which the castings are given their shapes. Therefore, by virtue of the Explanation to Rule 57A, the credit taken on Resin was inadmissible.

The appellants argued that the Resins are used in relation to the manufacture of castings, which is covered by Notification No. 177/86. The Resins are not excluded items under Rule 57A, and the Sand Moulds are not goods as they are unstable, non-storable, and non-marketable. They cited several decisions to support their claim that Resins used in the preparation of Sand Moulds should be eligible for Modvat Credit.

The Department contended that Sand Moulds are equipment, and thus, the Resins used in their manufacture are not eligible for Modvat Credit as per the Explanation to Rule 57A. They relied on previous Tribunal decisions which held that Sand Moulds are equipment and thus excluded from Modvat benefit.

The Tribunal considered various decisions, including those of the Supreme Court, which emphasized the marketability criterion for excisability. The Tribunal found that Sand Moulds are unstable and not marketable, and hence not excisable goods. Therefore, the Resins used in the preparation of Sand Moulds are used in relation to the manufacture of castings and are eligible for Modvat Credit. The Tribunal followed the decision in Collector of Central Excise v. Leader Engineering Works, which held that chemicals used in the preparation of Sand Moulds are inputs for the manufacture of final products and are eligible for Modvat Credit.

2. Time-limit for demand beyond six months:

The Collector (Appeals) had held that the demand for the period beyond six months was time-barred. The Department challenged this decision, arguing that Rule 57-I, at the material time, did not have a time-limit restriction, and it was wrong to apply the time-limit in terms of Section 11A.

The Tribunal considered conflicting judgments from the Gujarat High Court and the Karnataka High Court. The Gujarat High Court had held that Section 11A's time-limit should not be read into Rule 57-I, while the Karnataka High Court had held that the time-limit under Section 11A applied even before the amendment of Rule 57-I. The Tribunal followed the Karnataka High Court's judgment and upheld the Collector (Appeals') decision that the demand beyond six months was time-barred.

Conclusion:

The Tribunal allowed the appeal on merits, holding that Resins used in the preparation of Sand Moulds are eligible for Modvat Credit as they are used in relation to the manufacture of castings. The Department's appeal on the time-limit issue was rejected, upholding the Collector (Appeals') decision that the demand beyond six months was time-barred.