1999 (4) TMI 170 - AT - Central Excise

Summary

Issues: Modvat credit on LPG for manufacturing final products.

Analysis:
1. Issue of Modvat credit on LPG: The appeals arose from an Order-in-Appeal regarding the allowance of Modvat credit on LPG used in manufacturing screws, bolts, nuts, etc. The question was whether LPG could be considered an allowable input. The respondents contended that LPG was an essential consumable input in the manufacturing process, particularly for creating an Endo Gas atmosphere in heat treatment furnaces. The Commissioner (Appeals) examined the relevance of LPG in the manufacturing process and relied on various judgments to support the allowance of Modvat credit on LPG under Rule 57A of the Excise Rules.

2. Commissioner's Decision: The Commissioner (Appeals) considered the term "in or in relation to" as per Rule 57A and concluded that LPG was crucial for manufacturing the final products. Citing judgments from the High Court of Calcutta and previous Tribunal decisions, the Commissioner allowed the benefit of Modvat credit on LPG used in the production of screws, bolts, nuts under Chapter 73 of the Central Excise Tariff. The Commissioner's decision was based on the necessity of LPG in the manufacturing process, as it was integral to the production of the final products.

3. Appellant's Argument: The appellant argued that LPG was only related to the functioning of the plant/furnace and not directly linked to the manufacturing of the final products. The appellant contended that the case-law cited by the Commissioner was distinguishable, challenging the allowance of Modvat credit on LPG. However, the appellant's arguments were not found to be convincing in light of the manufacturing process and the essential role of LPG in producing the final products.

4. Judicial Precedent: The Tribunal referred to a similar case involving the grant of Modvat credit for Nitrogen gas used to create an inert atmosphere in the manufacturing process of a final product. Citing the Gujarat State Fertilizers Company Ltd. case, where Modvat credit was allowed on Nitrogen gas, the Tribunal upheld the decision to extend Modvat credit on LPG for the manufacturing process in question. The Tribunal emphasized the necessity of LPG in the manufacturing process and rejected the appeal based on the established legal principles and precedents.

In conclusion, the judgment affirmed the allowance of Modvat credit on LPG for the manufacturing of final products, emphasizing the essential role of LPG in the production process and relying on legal precedents to support the decision.