1998 (4) TMI 370 - AT - Central Excise

Issues Involved:
1. Explosives
2. Grinding Media (Steel Balls) and Cylpebs
3. Refractories (Fire Bricks) and Refractory Cement
4. Steel Castings
5. Ball Bearings
6. Electrodes
7. Rubber and Articles of Rubber

Detailed Analysis:

1. Explosives:
The primary issue is whether explosives such as Safety Fuses, Detonating Fuses, Denoting Caps, and Igniters, used in limestone mines, qualify as "inputs" under Rule 57A of the Central Excise Rules for the manufacture of clinker and cement. The Tribunal noted that these explosives are used in mines, which are not registered as factories under the Central Excise Act. Therefore, Modvat credit on explosives is inadmissible as they are not received or used in the factory premises registered with the Central Excise department. The Tribunal also referenced a previous decision where the admissibility of Modvat credit on explosives was referred to the High Court.

2. Grinding Media (Steel Balls) and Cylpebs:
Grinding Media, including Steel Balls and Cylpebs, used in Cement Ball Mills for grinding clinker, are categorized as "capital goods" rather than "inputs." The expenses for these items are booked under capital goods. The Tribunal highlighted that Modvat credit on these items was availed as capital goods under Rule 57Q, not as inputs under Rule 57A. Hence, a question of law arises regarding their eligibility as inputs for Modvat credit.

3. Refractories (Fire Bricks) and Refractory Cement:
Refractories are used as lining in kilns, which are capital goods. These items are essential for maintaining the kiln's functionality. The Tribunal noted that Refractory Bricks were included as capital goods by amending Rule 57Q, indicating their exclusion from the definition of inputs under Rule 57A. Refractory Cement, used to fix the bricks, is also not considered an input for manufacturing clinker or cement. Therefore, a question of law arises regarding their eligibility for Modvat credit as inputs.

4. Steel Castings:
Steel Castings, including liner plates used as inner linings in mills, are considered parts or accessories of capital goods rather than inputs. The Tribunal noted that manufacturers claimed Modvat on these items as capital goods under Rule 57Q. Therefore, a question of law arises regarding their eligibility as inputs under Rule 57A.

5. Ball Bearings:
Ball Bearings are components of various machines used to reduce friction or provide rotary movement. They fall under the exclusion category of Rule 57A's definition of inputs. The Tribunal referenced a previous decision where Modvat credit on Ball Bearings was held inadmissible under Rule 57A. Therefore, a question of law arises regarding their eligibility for Modvat credit as inputs.

6. Electrodes:
The Tribunal distinguished between Arc Welding Electrodes used for maintenance and Graphite Electrodes used in the manufacturing process. Arc Welding Electrodes do not participate in the manufacturing process of clinker or cement and are used for repair works. Therefore, a question of law arises regarding their eligibility for Modvat credit as inputs.

7. Rubber and Articles of Rubber:
Rubber and Articles of Rubber, specifically Conveyor Belts, are used for material handling and are considered components or accessories of material handling systems. The Tribunal noted that these items are covered by exclusions in Rule 57A's definition of inputs. Therefore, a question of law arises regarding their eligibility for Modvat credit as inputs.

Conclusion:
The Tribunal decided to refer the following questions of law to the Hon'ble M.P. High Court for consideration:

1. Whether credit as inputs in terms of Rule 57A of the Central Excise Rules, 1944, is admissible on Explosives.
2. Whether credit as inputs is admissible on Grinding Media.
3. Whether credit as inputs is admissible on Cylpebs.
4. Whether credit as inputs is admissible on Refractories (Fire Bricks).
5. Whether credit as inputs is admissible on Steel Castings.
6. Whether credit as inputs is admissible on Ball Bearings.
7. Whether credit as inputs is admissible on Electrodes.
8. Whether credit as inputs is admissible on Refractory Cement.
9. Whether credit as inputs is admissible on Rubber and Articles of Rubber.

The Registry was directed to draw up the necessary papers for reference.

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