1996 (11) TMI 156 - AT - Central Excise

Summary

Issues: Admissibility of Modvat credit on Triethylene Glycol (TEG) for cleaning filters in the manufacturing process of Polyester chips.

The judgment pertains to an appeal filed against an order disallowing Modvat credit on Triethylene Glycol (TEG) by the Commissioner (Appeals) Customs and Central Excise, Ghaziabad. The appellant, engaged in the manufacture of Polyester chips, declared TEG as an input for use in the manufacturing process. A show cause notice was issued proposing to disallow the credit on TEG, asserting that it was used for maintaining filters in the plant, not directly in the manufacture of the final product. The adjudicating authority confirmed the demand and imposed a penalty, which was upheld on appeal.

The appellant argued that as per Rule 57A of the Central Excise Rules, Modvat credit should be available on goods used in or in relation to the manufacture of the final product, provided both the input and final product are notified. The appellant contended that TEG, even if used for filter maintenance, should qualify as an input for the manufacturing process, citing Supreme Court decisions that interpreted "used in or in relation to manufacture" broadly. The appellant emphasized that TEG was not listed as an ineligible input in Board clarifications and trade notices.

The respondent, however, supported the lower authorities' findings that TEG was solely used for filter maintenance and not directly in the manufacturing process of Polyester chips. The Tribunal considered whether TEG's use for cleaning filters constituted usage in or in relation to the manufacture of the final product. It concluded that since TEG was employed only for maintaining filters, it did not directly contribute to the manufacturing process of Polyester chips. Additionally, the Tribunal noted that a trade notice declared inputs for maintenance of plant and machinery as ineligible, further supporting the disallowance of Modvat credit on TEG.

Ultimately, the Tribunal upheld the decision disallowing Modvat credit on TEG, stating that its use for cleaning filters did not qualify as usage in the manufacturing process of Polyester chips. The appeal was dismissed based on the finding that TEG was ineligible for Modvat credit as it was solely utilized for maintaining filters, not for direct manufacturing purposes.