1996 (7) TMI 398 - AT - Central Excise

Summary

Issues:
1. Eligibility of Modvat credit for lubricating oil and hydraulic oil used in manufacturing process.

Analysis:
The issue in this case revolves around the eligibility of Modvat credit for lubricating oil and hydraulic oil used in the manufacturing process. The appellants, engaged in the manufacture of copper strips/foils, aluminum pressure cookers, and racks, used these oils during production. The Assistant Commissioner initially denied the credit, stating that only inputs directly used in or in relation to the final product's manufacture qualify. The Collector (Appeals) upheld this decision, leading to the appeal.

Shri Yadav, representing the appellants, argued that the oils played a crucial role in the manufacturing process, citing a previous Tribunal case involving Pragati Paper Mills. The Tribunal in that case had held that if a material is used in or in relation to the manufacture of the final product, Modvat credit should be allowed, regardless of its specific use. The Tribunal emphasized that the term 'in relation to the manufacture' has a broad meaning and includes materials that are integral to the production process.

On the other hand, the Departmental Representative contended that the oils were only used for cleaning and maintenance, not in the main manufacturing process. However, the Tribunal, after considering both arguments, sided with the appellants. Citing the Pragati Paper Mills case and the principle that materials with a significant role in the final product's manufacture should qualify for Modvat credit, the Tribunal allowed the appeal. The judgment emphasized that without the lubricating oil, the final product would not come into being, aligning with the Larger Bench's decision on the matter.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the previous orders and allowing the Modvat credit for the lubricating oil and hydraulic oil used in the manufacturing process. The decision was based on the principle that materials contributing significantly to the final product's manufacture should be eligible for credit, even if not directly part of the main manufacturing process.