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TMI Blog1995 (11) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1944. Hence he has confirmed the findings of the Assistant Collector and held that they are not inputs and no MODVAT Credit is allowable on the same. 2.2 Appeal No. E-105/94 is an appeal filed by the appellant Collector against the Order passed by the Collector of Central Excise (Appeals) in Order No. 44/BBSR/94, dated 31-1-1994. In that particular case, ld. Collector(Appeals) held that the steel ball in question gets itself corroded and consumed in the final product. He also held that the steel ball is to be treated as an input used in relation to the manufacture of the final product and the same has formed an integral part of the finished product. He also held that the steel balls by themselves cannot be treated as machines, equipments, apparatus, appliances or tools. Hence he allowed the MODVAT Credit as claimed by the respondents, M/s. Magnetix (I) Ltd. with respect to these steel balls. 2.3 Appeal No. E-89/95 is an appeal filed also by the appellant Collector against the Order passed by the Collector (Appeals) in Order No. 183/BBSR/93, dated 18-4-1994, 258/BBSR/94, dated 13-5-1994. In this case, the Collector(Appeals) held that he has already held the issue in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grinding media is integrally connected with the ultimate production of the final products, they are entitled for the benefit of the MODVAT CREDIT under Rule 57A of the Central Excise Rules, 1944. In support of his contention, he relied upon the decision of the Tribunal reported in 1995 (76) E.L.T. 358 in the case of Indian Rayon Industries Ltd. v. Collector of Central Excise. He further relied upon the decision of the Calcutta High Court in the case of Singh Alloys Ltd. v. Assistant Collector of Central Excise reported in 1993 (66) E.L.T. 594. He further stated that where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression, in or in relation to the manufacture of goods . Therefore, he stated that since the grinding balls themselves are consumed in the manufacturing process and they go into the final product, they are to be treated as inputs and the MODVAT Credit is available under Rule 57A. He also contended before us that in order to come within the definition of machine, machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal product. But in that process they also grind the other inputs and make them into fine particles. Therefore, it is seen that the use of the steel balls in question are in relation to the manufacture of the final product and since they get themselves corroded and become a part of the final products, it is clear that they are in the nature of inputs used for the production of the final products and the final products cannot be manufactured without the use of these steel balls. Therefore, the finding that it is not an input cannot be sustained. 5.3 Ld. J.D.R., Shri S.N.Ghosh invited our attention to the decision of the Tribunal in the case of Electrosteel Castings Ltd. reported in 1989 (43) E.L.T. 305 cited supra. Relying in the abovesaid decision, he contended that these steel balls are parts of the machine. Therefore, he stated that even parts of the machine are machines by themselves and they got excluded in view of the Rule 57A(l) and the Explanation thereto. In order to appreciate this contention, it is necessary to extract Para 6 of the abovecited Judgement in 1989 (43) E.L.T. 305 which reads as follows : 6. It is impossible to give a precise definition and categorisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was functioning for the grinding of the inputs. But that is not the case here. Here in this case, the steel balls themselves are taking part in the production of the final products and in that process, they get themselves consumed as part and parcel of the final products. 6.1 The question therefore to be decided is whether they can be considered as a machine, machinery, tool or appliance as was raised by the Revenue. 6.2 In this connection, ld. Advocate, Shri Mohanty appearing for the assessee, M/s.Magnetix (India) Ltd. drew our attention to the decision of the Calcutta High Court in the case of Singh Alloys and Steels Ltd. reported in 1993 (66) E.L.T. 594 wherein at paras l8 to 23 their Lordships of Calcutta High Court held as follows: 18. The next question is are the items plant, machine, machinery, appliances etc.? In my view, they are not. 19. The items certainly do not come within the dictionary meaning of machines or machinery or instruments or appliances. The items are chemicals and have been classified as such in the Tariff Act. Merely because chemicals are used for the machinery do not make the chemicals, machinery. It does not matter that the items are used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chines, Equipment, Apparatus, Tools and Appliances are all classified under Headings and Sections which are totally different from the Headings and Sections under which the items are classified. 22. The Tribunal has erred in seeking to limit the meaning of the word `inputs to those items which go into the steel ingot completely overlooking the phrase `in relation to in the definition in the major clause of the explanation. 23. The respondents then argued that steel ingots could be manufactured even without the items. That may be so, but that is immaterial. The definition of inputs is not dependent upon what ought to be used but what is in fact used. There is no dispute that the petitioner No. 1 had in fact, used and uses the items in the manufacturing of ingots. The Supreme Court has also held that manufacture would include a process which was commercially expedient in the production of goods [See : Collector of Central Excise v. Eastend Paper Industries 1989 (4) SCC 244 = 1989 (43) E.L.T. 201 (S.C.); Collector of Central Exise, Jaipur v. Rajasthan State Chemical Works AIR 1991 SCC 2222 = 1991 (55) E.L.T. 444 (S.C.)]. That the process in question is commercially expedien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the above finding and the decisions of various judicial bodies, I respectfully agree with the test laid down by the Apex Court and hold that the credit of Modvat on grinding media will be available to the appellants. I also find that tools are normally attached to machines, but the steel balls are not attached as such and therefore do not fall in the category of tools. Having regard to the findings of the Tribunal, I agree that Modvat credit will be available on grinding media also." 7.2 The abovecited decision is squarely applicable to the facts of these cases and therefore, the steel balls in question cannot be considered to fall under the category of tools. 8.1 But the ld. J.D.R. Shri Ghosh has relied upon the decision of the Tribunal reported in 1993 (63) E.L.T. - 328 (Tribunal) in the case of Collector of Central Excise v. Indian Plywood Mfg. Co. Ltd. relying on the abovesaid decision, he stated that the steel balls are in the nature of an apparatus or a tool. 8.2 In that particular decision, Sand Paper was used for finishing wood. Sand Paper was mounted on the drums and it worked on the wood. The Sanders became functional only by the mounting of the San ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and apparatus by themselves have been precluded from the benefit of the MODVAT credit. Cascading effect of the duty paid on the machinery used in or in relation to the manufacture of the finished goods is not to be mitigated and as a corollary thereto the parts which are used in these machineries to make them functional also are not entitled to the benefit of the MODVAT scheme. These parts which are used as replacement from time to time have to be held to have been used in relation to the machines themselves and not in relation to the manufacture of the goods. In the scheme of MODVAT if the parts of the machines are included there is no reason why the lighting equipment and other structural fittings which are used in the factory in which the goods are produced would not have to be allowed the benefit of the input duty relief under the MODVAT scheme. Going by the ratio of the judgment of the Hon ble Supreme Court cited supra, it has to be concluded that the credit has to be allowed only in respect of such of those inputs which are used in the process of manufacture and which go directly into the manufacturing stream by themselves or are used in the manufacture of materials which go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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