1997 (10) TMI 172 - AT - Central Excise

Summary

Issues:
- Appeal against order-in-appeal allowing Modvat credit for clean flo chemical used in air conditioning system.

Analysis:

1. The appeal was filed by the Revenue against the order-in-appeal that allowed the benefit of Modvat credit for clean flo chemical used in removing deposits from the cooling coil of the air conditioning system. The appellant contended that clean flo was not an input directly related to the production of the final product, citing a previous Tribunal decision regarding denial of Modvat credit for lubricants and greases used for machinery operation enhancement.

2. The appellant argued that clean flo was essential for maintaining process conditions by cleaning the cooling coil of the air conditioning system. The respondent relied on precedents where Modvat credit was allowed for cleaning reducers and other materials used in the manufacture of final products. The respondent emphasized the importance of clean flo in controlling temperature for maintaining process conditions of the final product.

3. The Tribunal noted that in a previous case involving lubricants and greases, Modvat credit was denied as they were used for machinery operation improvement, not directly related to final product production. However, in the present case, clean flo was used to remove deposits from the cooling coil of the air conditioning system, essential for maintaining process conditions of the final product. Precedents were cited where Modvat credit was allowed for similar cleaning agents used in the manufacturing process.

4. The Tribunal referenced cases where Modvat credit was granted for chemicals like anti-rust and anti-collusion oils used in the manufacture of finished products. The Tribunal highlighted that as long as goods are used in or related to the manufacture of the final product and not excluded by specific clauses or notifications, Modvat credit should be allowed. The decision was supported by a High Court ruling emphasizing that any item manufactured and used in relation to the final product's manufacture qualifies as an input, regardless of its use in machinery.

5. Considering the arguments and precedents presented, the Tribunal found no fault in the order-in-appeal that allowed Modvat credit for the clean flo chemical used in the air conditioning system. Consequently, the appeal filed by the Revenue was dismissed, upholding the decision to grant Modvat credit for the essential input in maintaining the process conditions of the final product.