1995 (5) TMI 144 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Modvat credit for refractory bricks.
2. Interpretation of Rule 57A concerning inputs and excluded items.
3. Applicability of previous judgments and their relevance to the current case.

Issue-wise Detailed Analysis:

1. Eligibility of Modvat Credit for Refractory Bricks:

The primary issue in this case is whether refractory bricks used as furnace lining material qualify for Modvat credit under Rule 57A. The appellants argued that refractory bricks are essential inputs used in relation to the manufacture of aluminum, citing the judgment of the Calcutta High Court in Singh Alloys & Steel Limited, which extended Modvat benefits to similar materials like ramming mass. The respondents contended that refractory bricks are integral parts of the furnace and should be classified as equipment or machinery, thus not eligible for Modvat credit.

2. Interpretation of Rule 57A Concerning Inputs and Excluded Items:

The appellants claimed that refractory bricks should be considered inputs within the meaning of Rule 57A, as they are used in relation to the manufacture of aluminum. They argued that the High Court's interpretation in Singh Alloys & Steel Limited should apply, which held that materials used to protect the furnace lining are inputs and not excluded items. The respondents, however, maintained that refractory bricks are parts of the furnace and should be excluded from Modvat credit, referencing the Tribunal's decision in Mukund Iron & Steel Ltd., which classified refractory bricks as structural materials necessary for the furnace's operation.

3. Applicability of Previous Judgments and Their Relevance to the Current Case:

The appellants relied heavily on the Calcutta High Court's judgment in Singh Alloys & Steel Limited, which had been followed by the Tribunal in A.B. Tools, to argue that refractory bricks should be eligible for Modvat credit. The respondents countered by citing the Tribunal's decision in Alembic Glass Industries, which classified refractory bricks as parts of industrial furnaces, and argued that the Calcutta High Court's ruling on ramming mass did not directly apply to refractory bricks.

Majority Opinion and Conclusion:

After hearing both sides, the Tribunal members were divided in their opinions. The Member (Judicial) found that the appellants had made a strong prima facie case for waiver of pre-deposit and stay of recovery, citing the Calcutta High Court's judgment in Singh Alloys & Steel Limited. The Member (Technical) disagreed, arguing that refractory bricks are different from ramming mass and should be classified as parts of the furnace, thus not eligible for Modvat credit.

The matter was referred to a third member, who agreed with the Member (Judicial) that the appellants had a prima facie case on merits and that the pre-deposit should be waived and recovery stayed pending the appeal. The majority opinion thus favored the appellants, waiving the pre-deposit of duty and staying recovery.

Final Note:

The Tribunal, in its majority decision in the Final Order No. A/129/95-NRB, dated 21-2-1995, held that Modvat credit is not admissible on fire-bricks, indicating a broader interpretation that may affect similar cases in the future.