1996 (12) TMI 154 - AT - Central Excise

Summary

Issues: Modvat credit eligibility on foundry fluxes and other chemicals used in the manufacture of sand moulds and cores for valves and cocks.

Analysis:
1. The manufacturer availed Modvat credit on inputs like foundry fluxes used in the preparation of sand moulds for manufacturing valves and cocks. The Department contended that these inputs were only used in the manufacture of sand moulds, not in relation to the final products. The Assistant Collector demanded duty of Rs. 90,125.92 under relevant provisions of the Central Excises and Salt Act, 1944.

2. The manufacturer appealed to the Collector (Appeals) who held that foundry fluxes were indirectly used in the manufacture of valves and cocks, allowing the appeal based on precedent cases. The decision relied on the case of C.C.E. Chandigarh v. Leader Engineering Works, where foundry fluxes were considered eligible inputs.

3. The Department challenged the Collector (Appeals) decision before the Tribunal, citing various precedents. The Tribunal upheld the Collector (Appeals) decision based on the case of C.C.E., Chandigarh v. Leader Engineering Works, rejecting the Department's appeal.

4. Subsequently, the Department filed a Reference Application seeking a legal opinion on the eligibility of Modvat credit on foundry fluxes and other chemicals. The Tribunal, relying on previous decisions, declined to refer the question to the High Court, stating that the legal position was settled.

5. The Revenue then approached the High Court of Punjab and Haryana, which directed the Tribunal to refer the specific question of law regarding the admissibility of Modvat credit on foundry fluxes and chemicals used in the manufacture of sand moulds for valves and cocks.

6. Various Tribunal decisions were cited to support opposing views on the issue. While some cases held that sand moulds and cores were not eligible for Modvat credit, others, like C.C.E. Chandigarh v. Leader Engineering Works, recognized them as directly utilized in the manufacture of final products, making them eligible for credit.

7. The Tribunal's larger bench in Shri Ramakrishna Steel Industries Ltd. v. C.C.E,. Madras affirmed that Modvat credit was admissible for chemicals used in sand moulds in the manufacturing process of final products like steel castings.

8. Due to conflicting decisions and the absence of a higher court ruling, the High Court was asked to provide an opinion on the admissibility of Modvat credit on foundry fluxes and chemicals used in the manufacture of sand moulds and cores for valves and cocks.