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TMI Blog1989 (7) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant and after observing principles of natural justice, the Assistant Collector passed an order holding that the aforesaid goods, which are claimed as inputs are not covered by the explanation to the term in put given in Rule 57A of the Central Excise Rules and therefore disallowed the appellants for availing of MODVAT credit in respect of duty paid on these goods. The matter was taken up in appeal before the Collector (Appeals), which also came to be rejected. The present appeal is against the aforesaid order of the Collector (Appeals). 4. Shri T.R. Andhyarujina, the learned senior counsel, appearing on behalf of the appellants referred to the provisions of Rule 57A and also to the Notification issued under the MODVAT scheme showing that these inputs are covered by Notification as also their final products, namely iron and steel. He also pointed out that under Rule 57A the main criterion is that the inputs are to be used in or in relation to manufacture of the finished product. He, therefore, contended that the term inputs has got a wider connotation. It is not merely restricted to raw-materials or components. If the material is used even in relation to manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be not machinery, plant or apparatus and allowed input benefit under MODVAT scheme. On the same analogy, refractory materials which cannot be equated with the machinery, plant or apparatus should be extended the MODVAT benefit. He also referred to the Board s Tariff Advice given in F.No. B-22/51/86 TRU, dated 21-10-1986, wherein Graphite Electrodes which are parts of furnace are given the MODVAT benefit on the ground that it is a consumable item and it is essential for manufacture of steel. The same criteria should be adopted in this case for extending the benefit. He also referred to the Trade Notice in regard to pyrometer tips, wherein pyrometer tips, which are part of an instrument for measuring the temperature have been extended the MODVAT benefit on the ground that they get consumed. In this context he referred to the Trade Notice No 209/M, dated 7-8-1987 issued by the Collectorate of Central Excise, Calcutta-II. He also argued that the term inputs under Rule 57A has wider implication and cannot be given a restricted meaning. He sought to draw the analogy on the Supreme Court judgment reported in AIR 1965 SC (563) and also another Sales Tax judgment reported in 1972 (Vol. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to manufacture of the steel. They are only required for maintenance of the Capital Goods. He also cited the Board s Tariff Advice contained in Board s letter No. 267/53 88, dated 12-4-1988. He also cited the judgment of the Tribunal in relation to Rule 56A reported in 1985 ECR 1355 SRB. 6. The learned senior counsel, in reply, contended that the Tribunal decision referred to by the learned SDR, Shri Mondal, is in relation to Rule 56A, which extends input relief only in respect of raw material and components and is therefore different from the scheme under Rule 57A. He also contended that the Board s Tariff Advice referred to by the learned SDR is based on their appreciation of facts in relation to cement industry and cannot be made applicable to refractories used in the steel industry. He also submitted that the Tariff Advices are not binding on the Tribunal and the issue is required to be decided on merits. 7. After hearing both sides and perusal of the available records, we observe that the only and the main issue which is required to be decided in this appeal is whether refractory bricks and other refractory materials used in lining the furnace and other equipments like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lining the entire surface and cementing them so as to provide heat resistance and corrosive resistance lining for these machines and equipments. In that sense they could be broadly called a constructional material for lining the machine to effectively perform, by withstanding the heat and chemical reaction. They are more in the nature of constructional material required for lining the machines and equipment, than in the nature of material fed into the furnace for chemical reaction or for improving the quality of steel making. When this point is clear, that they go as a constructional material for lining the machine or equipment, even if they bring about the change in the substance in the final product, they would get excluded because of the explanation of Rule 57A. Hence we are of the view that the prime test to apply is whether the refractory goods are required as material for the effective functioning and maintenance of the machinery or they are needed in or in relation to manufacture of final product, namely steel. Pausing for a moment, items like coke, lime are fed with each batch and they are required for the manufacture of steel and can be said to have been used in or in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. v. Collector - 1989 (41) E.L.T. 424 (Tribunal). In that case, the disputed item was Titanium Metal Anodes, which is essential in the process of electrolysis. It was held by this Bench that it cannot be called a machine, machinery, plant, equipment, apparatus, tool or appliance. It is an input required for the production of the final product, without which the process of electrolysis is not possible. Hence we are unable to draw support from the aforesaid decision. 10. Our attention has been drawn to the Board s Tariff Advice in regard to Pyrometer tips and Graphite electrodes. While we would not like to express any opinion on those Tariff Advices in the absence of all the data required, we hold the view that merely a part of an apparatus, tool, or machine gets consumed in the process does not make it an eligible input under Rule 57A. We are of the view that so long as an item is identified with machine, equipment, tool or apparatus, they get excluded by way of explanation to Rule 57A. 10A. Now coming to various technical literatures cited by the learned senior counsel, we would like to refer for purpose of record to consider the question whether the refractory material us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this role it must be allowed to react with the sulfur or phosphorus in the melt and not with the silica from the refractories more acidic material than phosphorous or sulfur. Accordingly, basic refractory lined contained (of dolomite or magnesite) is provided to allow the removal of the undesirable phosphorous and sulfur from the melt to the slag without excessive corrosion of the refractory lining. (Emphasis supplied) From the above, it is observed that for enabling the lime to function by reacting with the phosphorus and sulfur in the slag, basic refractory line consisting of dolomite or magnesite is to be provided and this is essential mainly for preventing the excessive corrosion of refractory lining. Again the facilitation of removal of impurities is not the main function of the refractory. A particular coating or lining of dolomite or magnesite is adivsded to prevent the liner from reacting to silica in the refractory and corroding it. Hence we are unable to appreciate the view taken by the learned senior counsel that these refractories actively participate in the chemical process. 12. In another book Electric Arc Furnace Refractories, Chapter 5, by Mr. Bruce H. Bake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material for the protection of machine without which these machinery and equipments could not be put to repeated use because of excessive heat and chemical corrosion. 14. The citations made by the learned senior counsel are with reference to the Sales Tax cases. In one of the judgments Rule 13 of the Sales Tax Rules was the issue under consideration. In that Rule what was required to be considered is whether the registered dealer can purchase goods intended for use as raw materials for machinery, plant, equipment, tools, stores spare parts etc. in the manufacture or processing of goods for sale. In this case, Rule 57A by way of an explanation specifically excludes machinery, apparatus, equipment, etc. even though they are used in the production process. The objection has been raised that these refractory materials are used in the making or maintenance of those excluded category of goods. The other case cited by the learned senior counsel relates to hand gloves which the dealer purchased for use by their workers, while engaged in work in the factory. The Supreme Court held that the gloves put on by the purchasing companies workmen engaged in hot jobs or in handling corrosive sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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