1993 (6) TMI 140 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of oxygen, hydrogen, and molybdenum wire (molywire) as inputs used in the manufacture of electric lighting bulbs.
2. Utilization of Modvat credit for inputs used in the manufacture of glass shells captively consumed in the manufacture of electric bulbs.
3. Applicability of extended period for demands under the proviso to Section 11A/Rule 57-I.

Detailed Analysis:

Issue 1: Eligibility of Oxygen, Hydrogen, and Molywire as Inputs
Oxygen:
- Usage: Oxygen is used in various stages of manufacturing electric bulbs, including flange making, stem making, mounting, sealing, pumping, and capping.
- Key Considerations:
- Fuel vs. Tool: Oxygen, although aiding combustion, is not a fuel but a catalyst for burning. It is essential in the manufacturing process and cannot be considered a tool or appliance.
- Precedents: The tribunal referred to previous decisions (Mukund Iron Steel Works, Jyoti Steel Industries) and trade notices that supported the eligibility of oxygen as a consumable input.
- Conclusion: Modvat credit for oxygen is allowed as it is used in the manufacturing process and is not a tool or appliance.

Hydrogen:
- Usage: Hydrogen is used as a protective gas in the annealing process to relieve mechanical stress on tungsten coils.
- Key Considerations:
- Protective Gas: Hydrogen is necessary for maintaining the proper geometrical shape of tungsten coils at high temperatures.
- Precedents: The tribunal referred to the decision in the case of M/s Kopran Ltd., where Modvat credit was allowed for nitrogen gas used in a similar protective capacity.
- Conclusion: Modvat credit for hydrogen is allowed as it is essential for the manufacturing process.

Molywire:
- Usage: Molywire is used as a mandrel for coiling tungsten wire to form filaments and is subsequently dissolved in an acid bath.
- Key Considerations:
- Mandrel Function: Molywire acts as a core for coiling, similar to a mechanical appliance.
- Exclusion Clause: As an appliance, it falls under the exclusion clause of Rule 57A.
- Conclusion: Modvat credit for molywire is not allowed as it is considered an appliance.

Issue 2: Utilization of Modvat Credit for Inputs Used in Glass Shells
- Context: Glass shells are manufactured using duty-paid inputs and are used both for captive consumption in making electric bulbs and cleared outside.
- Key Considerations:
- Intermediate Goods: Glass shells are intermediate goods used in the manufacture of electric bulbs.
- Rule 57D: According to Rule 57D(2), credit cannot be denied for inputs used in intermediate products that are exempted or have nil duty, provided they are specified under Rule 57A.
- Conclusion: Modvat credit for inputs used in glass shells captively consumed in manufacturing electric bulbs is allowed.

Issue 3: Applicability of Extended Period for Demands
- Context: The demands for reversal of Modvat credit were based on alleged misdeclaration and suppression of material facts.
- Key Considerations:
- Declaration: Molywire was declared as an input, and its usage was known to the department.
- Bona Fide Misconception: The tribunal found no deliberate misstatement or suppression, considering the possibility of a bona fide misconception regarding molywire's eligibility.
- Precedents: The decision in Chemphar Drugs and Liniments was cited, where the Supreme Court held that extended periods could not be invoked without deliberate suppression or misstatement.
- Conclusion: The extended period for demands and penalties is not sustainable.

Final Judgment:
The appeals are allowed in the above terms, subject to the observations made regarding the specific usage of inputs and the liberty given to the department to verify certain factual positions.