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TMI Blog1995 (8) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... sed a penalty of Rs. 5 lakhs on the appellant under Rule 173Q(1) of the Central Excise Rules. 2. The appellants are engaged in the manufacture of caustic soda, chlorine, HCl Chloromethanes, and sodium cyanide. They filed declaration for availing Modvat credit in respect of various inputs. The impugned inputs involved in this appeal are caustic soda, Hydrochloric acid and Ion Exchange resins limited to their usage in the effluent treatment plant. The other inputs are M.E.G. (Mono Ethylene Glycol) and Mefron/Freon gases, which are used in the chilling plant. Modvat credit was sought to be denied on the ground that Freon/Mefron gases are used in respect of functioning of refrigeration plant and they cannot be construed to be inputs used in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 5 degrees C. in refrigeration system and circulated in the pipeline to maintain the temperature of HCN for the manufacture of Sodium Cyanide at 0 degree C. For purpose of anti-freezing of the solution in circulation, ethylene glycol is used. Freon/Mefron gases are used as refrigerant gases in the chilling plant. Chilled water is used in the condensor for cooling refrigeration system. In their effluent treatment plant, they use caustic soda lye, liquified chlorine, Hydrochloric acid and Ion exchange resins for destroying the traces of sodium cyanide in the effluents before discharge of the effluents outside. Shri Mehta, pleads that in regard to Monoethylene glycol it is used as brine solution in the chilling plant for maintaining the tem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued to be inputs used in or in relation to the manufacture of the final product. 5. As regards the items used in the effluent treatment plant, be points out that all these inputs are intended to destroy the trace of the final product. The final product namely sodium cyanide has already been manufactured. Whatever trace of the final product, which has gone in the effluent, is sought to be destroyed by these chemicals. Hence they cannot be said to be used in or in relation to the manufacture of the final product. They can only be said to be used in the destruction of the trace of the final product. Hence they should not be allowed Modvat credit going by provisions of Rule 57A. 6. On the ground of time bar, Shri Mehta pleaded that they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in respect of Mefron/Freon gases. Even in the present case, the gases are used in the refrigeration plant for keeping the input at 0oC. to enable the chemical reaction to take place. Hence they have to be construed as eligible inputs. 8.2 As regards MEG, this item is a chemical added to water for use as an anti-freezing agent in the chilling plant so that the solution does not get solidified and the process does not come to a stand still. Since it is an input used in the plant for maintaining the solution at 0oC to enable chemical reaction to take place, it has to be construed as an input used in relation to the manufacture of the final product. It has become a settled law that the inputs need not be physically present in the final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit. It is reported that these inputs are also used in other uses in other sections of the plant. Since the dispute is not about these other usages, our findings above are confined only to their usage in the effluent treatment plant. 9. The question of considering time bar is now an academic issue in respect of MEG, Mefron/Freon gases, since we have allowed their appeal on merits with regard to the eligibility. The time bar aspect is to be considered only in respect of demand relating to caustic soda, [Hydrochloric] acid and Ion exchange resins used in the effluent treatment plant. We have carefully looked in to this declaration. We find that there is a specific reference to effluent treatment plant against Hydrochloric acid in the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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