1995 (7) TMI 155 - AT - Central Excise

Summary

Issues:
Admissibility of modvat credit on oxygen gas used in the manufacture of S.S. ingots.

Analysis:
The appeal was directed against the order of the Collector (Appeals) regarding the admissibility of modvat credit on oxygen gas used in the manufacture of ingots. The Collector (Appeals) allowed the appeal based on settled issues and previous judgments, permitting modvat credit on oxygen gas when used for cutting purposes. The respondents, engaged in ingot manufacturing, had filed a refund claim for the period of October 1986 to July 1988, which was initially rejected by the Assistant Collector but later accepted by the Collector (Appeals) citing Trade Notice No. 68/90.

The appellant argued that the Trade Notice was not directly relevant to the case as it pertained to cutting of runners and risers from ingots, not cutting raw materials for ingots. The appellant contended that oxygen was a consumable item and not an input directly related to ingot manufacturing, citing tribunal decisions. As the respondents did not appear, the case proceeded ex parte. The Tribunal analyzed the use of oxygen for cutting scrap into smaller pieces, determining whether it was integral to the ingot manufacturing process.

The Tribunal referenced previous decisions, including one related to ship breaking, to assess the eligibility of modvat credit for oxygen gas. It was concluded that oxygen used for cutting scrap was not an essential part of the ingot manufacturing process and therefore not eligible for modvat credit. The Tribunal distinguished the case from previous judgments and clarified that oxygen use for welding purposes or cutting runners and risers of ingots did not align with the Trade Notice cited by the Collector (Appeals).

Examining the necessity of oxygen in the ingot manufacturing process, the Tribunal found that oxygen was not essentially required for ingot production and therefore, modvat credit was not applicable. Based on the evidence and legal analysis, the Tribunal set aside the impugned order and allowed the appeal, ruling against the availability of modvat credit for the respondents.