2000 (1) TMI 423 - AT - Central Excise

Summary

Issues:
- Modvat credit eligibility for inputs used in the manufacture of sand moulds/patterns for investment castings

Analysis:
The case involved appeals by the department against an order demanding duty from the respondents for the period related to the manufacture of investment castings using various inputs. The department contended that the inputs were used for making patterns/binders for moulds and not directly in the manufacture of final products, hence not eligible for Modvat credit. The original orders confirmed the demand based on these grounds. However, the Collector, on appeal by the respondents, held that sand moulds were integral to the manufacturing process of casting and not separate from it, allowing the appeal.

During arguments, the Excise Manager of the respondent cited a Larger Bench decision in the case of Shri Ramakrishna Steel Industries Ltd. v. CCE, where it was established that Modvat credit is admissible for duty paid on chemicals or resin used in the preparation of sand moulds for the manufacturing process of the final product, steel castings. The decision emphasized that inputs used "in relation to the manufacture" of the final product, even if not directly in the main manufacturing stream, are eligible for credit. Sand moulds were deemed crucial to the manufacturing of steel castings, justifying the use of chemicals or resin in the sand mixture as being "in relation to the manufacture" of the final product.

The judgment rejected the department's argument that the inputs were not used directly in the manufacture of the final product, emphasizing that the manufacturing process from mould to final product was continuous and interconnected. As the inputs were deemed to be used in relation to the manufacture of the final product, the appeals by the department were dismissed, affirming the eligibility of Modvat credit for the inputs used in the production of sand moulds for investment castings.