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TMI Blog1993 (5) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... the inputs for Robin Ultramarine Blue. 3. The appellants vide letter No. VBM : MB : 472, dated 13-4-1987 sought for necessary permission for availing of Modvat on crucibles and the said permission was granted by the competent authority (i.e. Assistant Collector of Central Excise, Asansol Division vide his letter No. V(30)/4/ASN/86/2270, dated 14-5-1987). But thereafter, a show cause notice was issued to the appellants requiring them to show cause as to why the Modvat Credit availed by them in respect of the crucibles should not be discontinued and as to why the amount of credit of duty paid amounting to Rs. 1,25,409.67 availed and utilised, shall not be disallowed in accordance with the provisions under Rule 57(I) of the Central Excises and Salt Act, 1944 and why the penalty should not be imposed on them under Rule 173Q of the Central Excise Rules, 1944. 4. The appellants filed a written reply dated 22-5-1989 wherein they had stated that the Assistant Collector had granted necessary permission for availing Modvat Credit vide his letter dated 14-5-1987. Therefore, a review of that order is not permissible. They further stated in the reply that Modvat benefit in respect of the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wider in scope than the expression : `in the manufacture of goods . Therefore, the crucibles are used in the manufacture of final products which are consumed in the process. It is also pointed out that since they are consumed in the process, they are not appliances or apparatus or equipments. 7. Rebutting the abovesaid arguments the learned J.D.R., Shri A. Choudhury stated that the Assistant Collector did not give any permission to the appellants by passing an order to take Modvat Credit on the crucibles. He stated that the same is only a letter issued to the appellants permitting them to take Modvat Benefit in accordance with law. Hence the question of review does not arise. 8. With respect to the other contention, Shri Choudhury further contended that the provisions of Modvat Credit were intended to liberalise the production of Set-off duty. He also pointed out that it is evident from the show cause notice that the manufacturing of their Ultramarine Blue indicates that the crucibles in question are used as equipments/apparatus/appliances. A mixture of China Clay Feldspar, Sulphur etc. is put into the crucibles which are placed into the kiln to burn the mixture and the cruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only in the nature of an acknowledgement of their letter dated 13-4-1987 and, therefore, the contention of the learned Consultant, Shri Kohli that an order was passed by the Assistant Collector permitting them to take Modvat Credit on crucibles on 14-5-1987, cannot be accepted. In that view of the matter, question of reviewing an order by issuing a separate show cause notice does not arise in this behalf. Hence this first contention raised by the learned Consultant cannot be accepted. 10. The next point that arises for our determination is whether the crucibles are used in relation to the manufacture of Ultramarine Blue. In the impugned order, the learned Additional Collector had admitted that the same are used in the manufacture of Ultramarine Blue. The relevant portion of his order reads as follows : The argument of the company shows that crucibles is process consumables and cannot be classified as equipment/apparatus". For this purpose the MODVAT system is to be applied in true spirit. The provisions MODVAT credit were intended to liberalise the provisions of set-off of duty. The language used in Rule 57(A) provides for set-off duty in respect of inputs used in or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otalling to Rs. 1,25,409.67 during the period from 1-4-1987 to 30-4-1988 on your duty paid inputs `crucible falling under Chapter No. 6901.00 which is used by you as equipment/apparatus and/or appliances in relation to the manufacture of final product viz. Ultramarine Blue and utilised the same towards payment of duty of your said final product which found to be inadmissible in terms of explanation Clause (1) of Rule 57A of C.E. Rules 44. You are therefore, requested to please state as to why the said credit so taken and utilised should not be denied and payable by you by adjusting it either from your RG 23A Pt. II or from P.L.A./c. within 7 days from the receipt of this letter." The show cause notice only makes a mention that it appears that crucibles are used as equipments/apparatus/appliances. No reasons are furnished in the show cause notice to justify this conclusion of the Department. But in reply to the show cause notice, the appellants stated as follows : - . . . . Crucibles are used in the manufacture of final products and are consumed in the process and are, therefore, process consumables. Therefore, crucibles being in the nature of consumables cannot be classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles enunciated in the abovesaid decisions, it is seen that these crucibles are inputs which are used in or in relation to the manufacture of Ultramarine Blue and they cannot be said to be apparatus or equipments or appliances. In order to be an input, it is also not necessary that the crucibles should go directly in the manufacture of the final products. It is not necessary that they should be present in any form in the final products. The only criterion that is to be satisfied is whether it is an input used in relation to the manufacture of Ultramarine Blue or not. It is not necessary that the same should be present in the ultimate final product. The presence of this crucible is so integrally connected with the ultimate production of the goods (Ultramarine Blue) that it would be commercially inexpedient to produce the finished goods without that process. Hence such an input will get a Credit of Duty. It is also not used as a machine or an apparatus or an appliance in the real sense of the above terms. In that view of the matter, disallowing the Credit of Duty taken on the above crucibles is not in accordance with law. We, accordingly, set aside the impugned order demanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the manufacture of final products and that these are used in the manufacture of final products and are ultimately consumed in the process. Denial of their claim, it has been submitted, would tantamount to ignoring the decision of the highest court of the land. In addition to the judgment in J.K. Cotton Spinning and Weaving Mills Co. Ltd., which has already been referred to in brother Nambiar s order. Reliance has also been placed on their other judgment in Collector of Central Excise v. Ballarpur Industries Ltd., reported in 1989 (47) E.L.T. 804. The Supreme Court in the said judgment had observed that the relevant test is not the presence (of the input) in the end-product but the dependence of the end-product for its essential presence at the delivery end of the process that it goes into the making of the end-product in the sense that without it, the presence of the end-product as such is rendered impossible, and that this quality should coalesce with the requirement that its utilisation is in the manufacturing process distinct from the manufacturing apparatus. 18. The point was elaborated by Shri Kohli in his argument during the hearing. He submitted that crucible is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd there is no serious dispute on this. The emphasis placed in support of the appellant s contentions in this regard is that without them the furnace cannot function. This does not detract from the manner of its use as apparatus. Shri Choudhury, Learned Departmental Representative referred to the definition of crucible in Chamber s dictionary of Science Technology as a refractory vessel or pot in which metals, chemicals etc., are melted. In the appeal it is stated that the crucibles are used in the manufacture of final products and are ultimately consumed in the process. Shri Kohli also stated that they are repeatedly used but pointed out that repeated use was not a disqualification and referred to our decision in the Straw Products case where felts which are also used repeatedly were nevertheless held to be eligible for Modvat credit. Repeated use and consumable nature or otherwise of the inputs are not conclusive factors in this connection. What is relevant is whether they are covered by the specifically excluded category of goods. Here I find that crucibles which are apparatus get disqualified and the findings of the Additional Collector in this regard would be valid. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for the benefit and they went ahead and availed of the credit. The notice fails on the ground of time bar. 22. In coming to this conclusion, I respectfully follow the decisions of the Hon ble High Courts of Karnataka and Madras in Tungabhadra Steel Products v. Superintendent of Central Excise, reported in 1991 (56) E.L.T. 340 and Advani Oerlikon Ltd. v. Assistant Collector of Central Excise, reported in 1993 (63) E.L.T. 427 respectively. In the former case, the Hon ble Karnataka High Court took note of two Supreme Court s decisions, Government of India v. Citadel Fine Chemicals - 1990 (42) E.L.T. 515 and J.K. Spinning Weaving Mills Ltd. v. Union of India, reported in 1987 (32) E.L.T. 234. In these judgments, the applicability of time-limit for issue of demand was laid down even though the respective provisions did not themselves contain time-limit stipulation. In the Madras High Court judgment, the following observations were made : 13. The omission in Rule 57-I before amendment of any mention of a notice to the manufacturer, the person chargeable to duty to show cause, cannot/could not absolve the respondents of their obligation in terms of Section 11A of the Act to serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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