1994 (5) TMI 87 - AT - Central Excise

Summary

Issues:
1. Whether cutting thermal insulation blocks into smaller sizes amounts to a manufacturing process.
2. Whether Modvat credit is available on the wastages and breakages occurring during the cutting process.

Analysis:
1. The appeal was filed against the order of the Collector, Central Excise (Appeals) by M/s. Hyderabad Industries Ltd., challenging the decision that cutting standard-sized thermal insulation blocks into smaller sizes does not change the nature of the product. The Assistant Collector had held that the manufacture of refractories is complete once standard-sized slabs and blocks are obtained, and any further operations are optional and not part of the manufacturing process. The appellant argued that cutting into smaller sizes is essential to make the goods marketable. The Tribunal found that making goods marketable is a process of manufacture and held that cutting the blocks into smaller sizes for marketability constitutes a manufacturing process. The Tribunal allowed the appeal, stating that the waste arising from this process is governed by Rule 57D(1).

2. The issue of Modvat credit availability on the wastages and breakages during the cutting process was also addressed. The Assistant Collector had denied Modvat credit, stating that Rule 57D of the Central Excise Rules, 1944 only covers wastages during the manufacturing process, not post-manufacture operations. However, the Tribunal disagreed and held that the waste arising during the process of cutting the thermal insulation blocks into smaller sizes is covered under Rule 57D(1). Therefore, the denial of Modvat credit on the waste cleared for destruction at NIL rate of duty was deemed unjustified in law. The Tribunal allowed the Modvat credit on the wastages and breakages occurring during the cutting process.

In conclusion, the Appellate Tribunal held that cutting thermal insulation blocks into smaller sizes to make them marketable constitutes a manufacturing process. The waste arising from this process is eligible for Modvat credit under Rule 57D(1). The appeal was allowed in favor of the appellant, granting them the Modvat credit on the wastages and breakages occurring during the cutting process.