1996 (12) TMI 191 - AT - Central Excise

Summary

Issues:
Appeal against denial of Modvat credit on inputs used in manufacturing steel products.

Analysis:
The case involved three appeals with common facts and legal points, all related to the denial of Modvat credit on inputs used in manufacturing steel products. The appellants owned an electric arc furnace for manufacturing steel ingots and a rolling mill for producing steel bars, rods, and other steel products. They also purchased duty-paid ingots, blooms, billets, and pieces for manufacturing. The dispute arose when the Collector disallowed Modvat credit amounting to Rs. 67,94,566.75 and imposed penalties totaling Rs. 3 lakh, covering the period from May 1991 to July 1992.

The Collector denied the credit on inputs, particularly steel ingots, stating a contravention of Central Excise Rules. However, the appellant argued that there was no requirement for detailed specifications in the declaration and no need for a one-to-one correlation between inputs and final products. The appellant cited precedents such as Kreyan Precision Machines v. C.C.E., Meerut and C.C.E. v. Manali Petrochemicals Ltd., supporting the claim that Modvat credit should be available for inputs used in subsequent product manufacturing.

The appellant also referenced the case of Panchmahal Steel Ltd. v. C.C.E., which declared certain goods as eligible inputs for manufacturing iron and steel, covering most disputed items except mild steel tubes. Regarding mild steel tubes, the Collector contended they were not inputs as they carried oxygen gas into molten metal. However, the appellant referred to the case of C.C.E. v. Kusum Ingots & Alloys Ltd., where lancing pipes used for passing oxygen into molten metal were considered inputs for steel manufacturing, covering the steel tubes as well.

Ultimately, the Tribunal found the Collector's denial of Modvat credit on disputed inputs to be incorrect. The precedents cited by the appellant supported the eligibility of the inputs in question. Therefore, the Tribunal set aside the Collector's orders, allowed the appeals, and directed appropriate relief to the appellants.