1996 (9) TMI 367 - AT - Central Excise

Summary

Issues Involved:
1. Meaning, scope, and ambit of the term "input" as per Rule 57A of the Central Excise Rules, 1944.
2. Meaning, scope, and ambit of the term "in relation to the manufacture of."
3. Whether the items Hegatreat and Hegafilm can be considered as used "in relation to the manufacture of the final product."

Detailed Analysis:

1. Meaning, Scope, and Ambit of the Term "Input" as per Rule 57A of the Central Excise Rules, 1944:
The appellants, manufacturers of synthetic rubber, claimed Modvat credit for two imported inputs, Hegatreat and Hegafilm. The department argued that these items were not used directly in the manufacture of synthetic rubber but as corrosion inhibitors in cooling water systems and steam generation systems. The Tribunal examined the definition of "input" under Rule 57A, which includes items used "in or in relation to the manufacture of final products." The Tribunal concluded that since the items were used for machinery maintenance and not directly in the manufacturing process, they did not qualify as inputs under Rule 57A.

2. Meaning, Scope, and Ambit of the Term "In Relation to the Manufacture of":
The appellants contended that the term "in relation to the manufacture of" should be interpreted broadly to include items that are technologically necessary for the manufacturing process. They cited several judgments, including the Supreme Court's decision in Collector of Central Excise v. Ballarpur Industries Ltd., which supported a broader interpretation of inputs used in an integrated manufacturing process. However, the Tribunal noted that the items in question were used as corrosion inhibitors and not directly in the manufacturing process, thus not meeting the criteria for being "in relation to the manufacture of" the final product.

3. Whether the Items Hegatreat and Hegafilm Can Be Considered as Used "In Relation to the Manufacture of the Final Product":
The appellants argued that the use of Hegatreat and Hegafilm was essential for maintaining the machinery, which in turn was necessary for the manufacturing process. They relied on several judgments where items not directly used in manufacturing were still granted Modvat credit. However, the Tribunal distinguished these cases, noting that in each cited case, the items were integrally connected to the manufacturing process. In contrast, Hegatreat and Hegafilm were used only for maintenance purposes and not directly in the manufacture of synthetic rubber. Therefore, the Tribunal held that these items did not qualify for Modvat credit.

Conclusion:
The Tribunal concluded that the appellants did not make a case for referring the matter to the High Court, as the issues raised were questions of fact and not of law. The items Hegatreat and Hegafilm were used as corrosion inhibitors and did not meet the criteria of being used "in or in relation to the manufacture of the final product" as per Rule 57A. Therefore, the reference application was rejected.