1994 (11) TMI 250 - AT - Central Excise

Summary

Issues:
Whether refrigerant gases can be treated as inputs under Rule 57A read with Rule 57G of the Central Excise Rules, 1944?
Whether refrigerant gases are excluded under the provisions of Rule 57A of the Central Excise Rules, 1944?

Analysis:

Issue 1:
The appeal involved a dispute regarding the classification of refrigerant gases, Mafron and Freon, as inputs for the manufacture of Rubber processing chemicals. The department contended that these gases were meant for the functional operation of the refrigerating plant and not for the manufacture of the final product. However, the Tribunal held in favor of the respondents, stating that the gases are necessary for maintaining the required temperature during the manufacturing process, enabling the chemical reaction to produce the final product. The Tribunal compared the use of these gases to consumable gases like oxygen/acetylene, which were previously deemed as inputs in the manufacture of steel castings. The Tribunal also referenced a previous case where nitrogen gas was considered an eligible input for Modvat credit due to its role in enabling proper chemical reactions.

Issue 2:
The Reference Application raised two questions: whether refrigerant gases could be considered inputs under the Central Excise Rules and whether they were excluded under Rule 57A. The Revenue argued that the gases were not consumables but part of the chilling plant's functioning, akin to domestic refrigerators. On the other hand, the respondents contended that the gases were consumable as they were brought in cylinders and consumed periodically. The Tribunal concluded that the gases, though necessary for the plant's operation, were indeed inputs for the manufacturing process. It rejected the argument that the gases were part of the equipment, stating that their consumable nature, periodic replacement, and role in maintaining the required temperature for chemical reactions classified them as inputs. The Tribunal emphasized that the clarity in both facts and the law under Rule 57A negated the need for a reference to the High Court, as there was no mixed question of fact and law involved.

In conclusion, the Tribunal dismissed the Reference Application from the Revenue, affirming that refrigerant gases like Mafron and Freon were eligible inputs for Modvat credit under the Central Excise Rules, as they played a crucial role in the manufacturing process by enabling the necessary chemical reactions.