1995 (7) TMI 150 - AT - Central Excise

Summary

Issues:
Admissibility of modvat credit on oxygen and acetylene gas used for carbonising inside moulds for steel ingots.

Analysis:
The appeal was filed by the Collector of Central Excise, Chandigarh challenging the decision of the Collector (Appeals) regarding the admissibility of modvat credit on oxygen and acetylene gas used for carbonising inside moulds for steel ingots. The respondents, engaged in manufacturing steel ingots, had availed modvat credit on various inputs including oxygen and acetylene gas. The Assistant Collector confirmed the demand on some inputs but allowed the credit on oxygen and acetylene gas. The Collector (Appeals) disagreed on the admissibility of credit for certain inputs but allowed it for oxygen and acetylene gas. The JDR for the Revenue argued that oxygen and acetylene gas were used for maintenance of ingot moulds, which are not considered inputs for the final product, hence not eligible for modvat credit. The JDR referred to the Ministry's letter and Trade Notice to support this argument.

The JDR contended that since oxygen and acetylene gas were used for maintenance of moulds, which are not considered inputs under Rule 57A, they should not qualify for modvat credit. The Collector (Appeals) had allowed the credit for oxygen and acetylene gas but not for other items like ingot moulds, ceramics, and refractory. The JDR argued that the gases were not used in the manufacturing process of steel ingots but for maintaining the moulds, which are equipment themselves. As no one appeared for the respondents during the hearing, the case was decided ex parte.

After considering the arguments and evidence, the judge found that oxygen and acetylene gas were used for carbonising inside the moulds to improve the surface of steel ingots. The judge disagreed with the Collector (Appeals) and held that the gases were not being used for cutting or welding purposes, as mentioned in the Collector (Appeals) order. The judge emphasized that the moulds are apparatus or equipment for maintaining proper conditions and their upkeep is separate from the manufacturing process. Therefore, the use of oxygen and acetylene gas for maintaining the moulds did not qualify as an input for modvat credit. The judge set aside the impugned order and allowed the appeal, ruling that modvat credit on oxygen and acetylene gas was not admissible in this case.