1995 (5) TMI 175 - AT - Central Excise

Summary

Issues:
Eligibility for set off credit under Notification 201/79 for cutting oils, quenching oils, and testing oils used in manufacturing motor vehicle components.

Analysis:
The appeal involved determining the eligibility for the benefit of set off credit under Notification 201/79 for specific oils used in the manufacturing process of motor vehicle components. The appellants, manufacturers of tractors and tractor components, utilized various petroleum-based industrial specialties such as cutting oils, quenching oils, and testing oils during processes like machining, heat treatment, and testing to manufacture high-quality finished components. These oils played crucial roles in metal cutting, heat treatment, and engine testing processes, ensuring the desired properties and performance of the final products.

The central issue revolved around whether these oils qualified as raw materials or component parts under Notification 201/79. The Assistant Collector initially allowed the credit of duty on these oils as they were considered inputs falling under Tariff Item 68. However, the Collector of Central Excise (Appeals) overturned this decision, stating that the oils were used as lubricants and not as raw materials or component parts directly contributing to the composition of the finished products. This discrepancy led to the appeal before the Tribunal.

The Tribunal analyzed the definitions of "raw material" and "component part" to determine the eligibility of the oils in question. It was established that raw materials serve as the starting point for a manufacturing process, while component parts form part of the composition of an article. The Tribunal concluded that the cutting oils, quenching oils, and testing oils, being used solely as lubricants in the manufacturing process, did not qualify as raw materials or component parts based on the dictionary meanings and popular understanding of these terms.

In support of their decision, the Tribunal referenced relevant case laws, including Rockdrill (India) Ltd. v. Collector of Central Excise and Kerala Electric Lamp Works Ltd. v. Collector of Central Excise, to highlight the distinction between raw materials/components and other materials used in manufacturing processes. These precedents reinforced the Tribunal's finding that the oils in dispute did not meet the criteria for raw materials or component parts under Notification 201/79.

Ultimately, the Tribunal upheld the decision of the Collector of Central Excise (Appeals), ruling that the cutting oils, quenching oils, and testing oils were not eligible for the benefit of Notification 201/79 as amended. The appeal was rejected based on the analysis of the oils' role as lubricants rather than essential raw materials or component parts in the manufacturing of motor vehicle components.