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TMI Blog1992 (10) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... months was not enforceable. The decision on merits has been challenged by the Company while that on limitation by the Collector, Calcutta-II. 2. S/Shri S.K. Bagaria and J.P. Khaitan, learned Advocates, appeared for the appellants. Shri Bagaria started his argument with the submission that for availing Modvat benefit three conditions are to be satisfied. The first is that both the inputs and the final products should be covered by the relevant Notification namely Notification No. 177/86, dated 1-3-1986. The second is that the inputs should be used in or in relation to the manufacture of the final product. The third is that the inputs should not be covered by the excluded category of inputs mentioned in the Explanation under Rule 57A. He, then, explained the manner of use of the material in question. The inputs in the present case are Resins and the final products are castings. The Resins are used for the preparation of Sand Moulds which is in relation to the manufacture of castings. Sand Moulds are not goods but they constitute a stage in the process of manufacture of castings. Sand, as such, cannot be used for the purpose of casting as it does not have any binding or cohesive pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z. machines, plant etc. 4. Shri Bagaria, then, submitted that the crucial question is whether the Resins are used in the manufacture of final products, Castings or they are used in the manufacture of any intermediate products. He clarified that they are not claiming Modvat Credit in respect of any material called Sand Mould. They are claiming the benefit only for Resins which are used in relation to the final product, Castings . Their input material for which they have claimed Modvat Credit is Resin. It is not an excluded type of input. If the input itself is not machine, machinery etc. which alone are the excluded items, then the exclusion clause cannot be invoked. He referred to the following decisions :- (i) 1990 (47) E.L.T. 376 - Collector of Central Excise v. Hindustan Development Corporation; (ii) 1990 (48) E.L.T. 283 - Cominco Binani Zinc Ltd. v. Collector of Central Excise; (iii) 1990 (48) E.L.T. 552 - Mukand Iron Steel Works Ltd. v. Collector of Central Excise; (iv) 1991 (56) E.L.T. 578 - Collector of Central Excise v. Bimetal Bearings Limited; (v) 1990 (49) E.L.T. 538 - Collector of Central Excise v. Weldekar Laminates (P)Ltd.; (vi) 1991 (56) E.L.T. 790 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not storable/transportable/marketable. He relied upon the decisions of the Supreme Court in Bhor Industries Ltd. v. Collector of Central Excise, Bombay reported in 1989 (40) E.L.T. 280 (SC) = 1989 (21) ECR 273 SC and another in Collector of Central Excise v. Ambalal Sarabhai Enterprises, reported in 1989 (43) E.L.T. 214. The marketability criterion for deciding whether the goods are excisable was stressed in these judgments. Applying this test the Sand Moulds are not excisable goods. Tariff Heading 8480.00 covers moulding boxes, moulding patterns, moulds for metals etc. Only marketable moulds are covered under this heading. Such moulds are marketed and are being regularly bought. They find repeated use. The exemption granted to Sand Moulds vide Notification No. 381/86, dated 29-7-1986 does not make Sand Moulds an excisable commodity. Excisability is not determined by exemption notifications. He relied upon the following decisions in this regard :- (i) 1983 (13) E.L.T 1216 - International Conveyors Ltd. v. Collector of Central Excise, Aurangabad; (ii) 1983 (13) E.L.T. 1123 - Golden Paper Udyog v. Collector of C. Excise; (iii) 1986 (24) E.L.T. 98 - Led Woollen and Silk Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng otherwise. Shri Bagaria contended that in their manufacturing process no equipment is produced and Rasins are used in relation to the manufacture of castings and not any other product. The Sand Moulds are not similar to identifiable products capable of being marketed which are in fact, marketed like the mould-boxes, dies etc. Steel is used for making them. Then they are used for manufacture of excisable products as equipment, tools etc. The Department will be justified in denying Modvat benefit for goods used in the manufacture of such tools etc. because they are distinct and identifiable goods which satisfy the criterion of goods on account of marketability. Such is not the case with Resins used for preparation of Sand Moulds which are not excisable goods. In the Shivaji Works case, the allegation that Sand Moulds are in the nature of equipment and foundry chemicals are used as inputs of Sand Moulds and not as inputs for castings had not been effectively met or rebutted by the Counsel for the appellants as observed by the Tribunal. But Shri Bagaria contended that they are contesting this two-fold stand of the Department namely - (a) an equipment is manufactured which is capable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unreported) [since reported in 1992 (61) E.L.T. 480 (Tri.)] and (ii) Collector of Central Excise v. Strain Products and Straw Products v. Collector of Central Excise, reported in 1992 (19) ETR 545 = 1992 (59) E.L.T. 572. Two decisions of the Special Bench of the Tribunal and of the North Regional Bench were cited by Shri Bagaria in support of the contentions raised by him. These decisions are as follows :- (i) 1992 (38) ECR 361: NRB - Collector of Central Excise v. Leader Engineering Works; (ii) 1991 (55) E.L.T. 248 - Hindustan Saintaryware Industries v. Collector of Central Excise. The former was in respect of Resins/Chemicals used in the preparation of Sand Moulds in the course of manufacture of castings. He also cited the decision in Collector of Central Excise v. Calcutta Steel Industries, reported in 1989 (39) E.L.T. 175 for his contention that it is for the Department to prove that goods are excisable. He relied upon the following decisions in support of his contention that simply because somethings may perform some functions in the process of manufacture they would not become apparatus/equipment, machine tools etc. and therefore, ineligible for Modvat :- (i) 1990 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. 25 (Guj.)] wherein it was held that it is not permissible to read the provisions of Section 11A of the Central Excises and Salt Act, 1944 into Rule 57-I when the said Rule, before its amendment on 6-10-1988, did not contain a time-limit condition. Shri Choudhuri pleaded that the Department s appeal be allowed and the Collector s order on this aspect set aside. 10. Shri Bagaria, learned Counsel for the respondents, M/s. Hindustan Motors Ltd., in this appeal, replied to the arguments of Shri Choudhuri. He submitted that, as against the judgment of the Gujarat High Court in the case cited by Shri Choudhuri, there is a judgment of the Karnataka High Court in Tungabhadra Steel Products Industries v. Superintendent of Central Excise, reported in 1991 (56) E.L.T. 340 (Kar.) = 1991 (33) ECC 140 holding that, even before the amendment of Rule 57-1, the time-limit under Section 11A, will be applicable for demand for recovery of Modvat Credit. He cited the following decisions of this Bench regarding the application of time-limit for Modvat recovery cases :- (i) 1990 (47) E.L.T. 132 - Collector of Central Excise v. TELCO; (ii) 1990 (51) E.L.T. 128 - Collector of Central Excise v. Vikr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, he has given his own finding very tersely in two sentences (underlined portion in the above extract). The reference to Resins used in the Sand Moulds and Cores used in furnace as layer for its upkeep and protection against heat appears to be irrelevant and does not arise from the Assistant Collector s order which was carried in appeal before him by the appellants as the Assistant Collector s finding in his order on this issue was only as follows :- .....In both these cases, the credit of duty paid on Resin is sought to be disallowed on the ground that the said input resin is used in the manufacture of sand moulds which in turn are used as equipment, apparatus or appliances for producing parts and accessories of motor vehicles. These parts and accessories are castings. By virtue of the Explanation to Rule 57A, therefore, the credit taken on resin is inadmissible. The assessees deny that the sand moulds are equipment etc. in terms of the said Explanation on the ground that these are not of a permanent nature and have only a one-time use. I am unable to agree with the assessees contention. Even though the sand moulds do have only a one-time use, these are neverthel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the issues have been comprehensively presented before us in the appeal memorandum and in the arguments of both the sides during the hearing as narrated above we proceed to dispose of the same. 12. Shri Bagaria, learned Counsel for the appellants, had pointed out that they are not claiming Modvat Credit for the Resins used in the manufacture or in relation to the manufacture of any product other than Castings, their dutiable product. Resins cannot be said to have been used in the manufacture of Sand Moulds because Sand Moulds are not goods for they have no shelf-life being unstable and incapable of being stored or marketed. In this connection, he had referred to the Supreme Court Judgments in Bhor Industries and Ambalal Enterprises cases wherein the marketability criterion had been laid down as an essential criterion for treating anything as goods for levy of excise duty. The criterion for treating any item as covered by the exclusion in the Explanation under Rule 57A had been laid down in several decisions of the Tribunal which were cited before us. Of these, two appear to be relevant namely, the cases of Avery India and Bimetal Bearings. It is not the manner of functioning an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a specific allegation by the department in the show cause notice that these moulds are in the nature of equipment. Shri Hidayatullah s contention that the allegation is cryptic without evidence is not tenable because the allegation in the show cause notice itself opens up as below : Sand moulds are in the nature of equipments and used for manufacturing castings. Foundry chemicals as mentioned above are inputs of sand moulds and not inputs of castings. The show cause notice clearly says that the sand moulds are in the nature of equipments and foundry chemicals are used as inputs of sand moulds and not inputs of castings. This allegation even during the argument of the learned advocate has not been effectively met or rebutted. He contends that there is no evidence to sustain the allegation that sand moulds are equipments. He does not assert that they are not in the nature of equipment, but asserts that they are intermediate products. We have carefully considered this argument. The term equipment as per the dictionary meaning, is described as an apparatus needed for any operation. Moulds for metals are apparatus needed for casting. They may be one-time use apparatus for cast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context, he relied on the provisions of sub-rule (2) of Rule 57(D), which reads as below : Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. (Emphasis supplied by us) 14. It is argued that the benefit of Rule 57(D) can be taken if the inputs have gone into any exempted intermediate product, which have come into existence during the course of manufacture of final product. Here, the final product is casting. It is claimed by the learned advocate that moulds are to be construed as intermediate products. 15. We have carefully considered this plea. It is an admitted position that sand moulds are independently manufactured. They do not occur at an intermediate stage in the product stream of the final product, and hence they cannot be construed to be an intermediate product which have come into existence during the course of manufacture of the final product. In our view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are not goods. Hence there is no getting away from the fact that, to be considered either for inclusion or exclusion in respect of Modvat benefit under Rule 57A, the material or item must be goods, satisfying the test of marketability. If they are not goods and do not attract duty there is no need to exclude them for Modvat benefit. Viewed from another angle, goods are the genus and equipment, appliance, tools etc. are the species. Only the goods belonging to the genus can come under the species. The items cannot be appliance, tools etc. without being goods. Conversely, if certain items are not goods, they cannot be equipment, tools, appliances etc. Hence the question whether Sand Moulds are equipment, tools etc. of the forbidden category, cannot be decided de hors the question whether they are finished excisable goods. In this respect, we have to respectfully differ from the view taken by the West Regional Bench. We do so, taking into account the following factors :- (a) The effect of the Supreme Court decision on marketability as the criterion for identifying a product as excisable goods had not been taken into account by that Bench as they considered this question not rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-heading 8480.00. Section Note 5 under Section XVI has been referred to by the Bench in para 17 of their order. It has been stated therein that according to the said Section Note, the expression, machine, means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or Chapter 85. But the Section Note itself begins with the words - For the purposes of these Notes . Hence the scope of the above clarification is limited to the Notes only. As stated earlier the first requirement is that the item should be goods. The sub-heading 8480.00 would thus refer to moulds which are goods for purposes of excise levy. In view of our decision that Sand Moulds are not goods to qualify for exclusion under Rule 57A, they cannot be classified under 8480.00 and cannot be treated as moulds falling thereunder and hence they are not equipment, appliance etc. for purposes of Rule 57A. 14. The Departmental Representative referred to the decision of the South Regional Bench in Mysore Kirloskar Ltd. v. Collector of Central Excise, reported in 1990 (50) E.L.T. 175. It was held by that Bench that inputs used in the manufacture of Sand Moulds which are themselves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on why the benefit under Notification 217/86 cannot be extended to Plaster of Paris used in the manufacture of ceramic products. They proceeded to state at paras 13 and 14 of their order as under : 13. The above view would also lead to a harmonious construction of Notifications 217/86 and 221/86. In terms of the latter, plaster of paris moulds used in the factory of their production for manufacture of ceramic products are exempt from excise duty. In the present instance, plaster of paris moulds have been produced in the appellants factory and they are used for manufacture of ceramic products. Now, Plaster of Paris moulds, it goes without saying, can only be manufactured from Plaster of Paris. If it is held that Plaster of Paris moulds are final products for the purpose of Notification 217/86 and are denied the benefit of Notification 221/86 when used in the manufacture of ceramic products, the net result would be that plaster of paris moulds produced in the factory and used in the manufacture of ceramic products would be denied exemption from duty though this is one of the specific objects of Notification 221/86. Such an obviously absurd result cannot be brought about by a proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which themselves get consumed in the process of manufacture of valves and cocks. Hence, Modvat credit benefit was available to them in respect of these chemicals. 37. In this respect we notice that the respondents have filed a detailed affidavit and in so far as it relates to the process of making sand moulds and cores the facts have not been contradicted or denied as such by the department. 38. The learned DR on the other hand has drawn our attention to the classification of moulding boxes for metal foundry, Mould bases, Moulding patterns and moulds for metal or metal carbides which filed a photocopy of the SCCM pages 1319 and 1320 showing such items as classifiable under 8480.30 and indicating that in general the essential function of a mould is to retain the material in a predetermined shape while it sets; some moulds also exert a certain pressure on the material. The DR has also argued that such moulds and cores are excisable and even dutiable unless exempted. 39. We have considered these submissions and observed that the process of manufacture of cocks and valves shows that the chemicals in question are utilised in the process for preparing specified cores and moulds whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preparation of Sand Mould is a process in or in relation to the manufacture of the final products. In that view of the matter, the contention that Resins are inputs in relation to the manufacture of the dutiable castings raised by the appellants, is agreed to by us. As held in the Leader Engineering Works case, there is nothing in the Modvat scheme which would bar the benefit being extended to such inputs which are indirectly utilised in the production of the final product. The scope of the benefit is not only for goods used in the manufacture of, but in relation to the manufacture of the final product. The use of Resins in the preparation of Sand Mould is not a separate manufacturing exercise delinked from the manufacture of castings but part of that ultimate process. The appeal merits acceptance and we order accordingly. 18. Since we have allowed the appeal on merits, the Department s appeal challenging the decision of the Collector (Appeals) limiting the scope of the demand to a period within six months and holding that demand for the period beyond the said period of limitation time-barred to be hit by time-bar would lose its relevance. However, since we have heard the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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