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TMI Blog1996 (7) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... products. Accordingly a show casue notice was issued asking the appellants to explain as to why Modvat credit of duty on refractories should not be disallowed and why the penalty should not be imposed on the appellants. After careful consideration of the submissions of the appellants the Collector (Appeals) disallowed Modvat credit and restricted the demand to the period February, 1988 to June, 1988. 3. Shri S. Madhwan, CA for the appellants submitted that the inputs and final products were specified items in the Notification 177/86 issued under Rule 57A; that the appellants observed the procedures set out under Rule 57G; that Rule 57G had nothing to do with availing Modvat credit; that Modvat credit was taken after compliance with the requirement of Rules 57A and 57G; that there was no question of recovery of credit under Rule 57-I. The Chartered Accountant submitted that the various items of refractories which are used for the steel making industries are consumable items, are not part of the furnace in which they are physically located and used; that the decision of the Tribunal in the case of Steel Authority of India reported in 1989 (42) E.L.T. 89 is directly on this point in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in the case of Doypack Systems reported in 1988 (38) E.L.T. 201, Eastend Paper Industries reported in 1989 (43) E.L.T. 201 and Rajasthan State Chemical Works reported in 1991 (55) E.L.T. 444. The CA referred to the definition of chemical goods in terms of explanation of Rule 57G(1) and submitted that refractories are not part of furnaces; that [refractories] were not part of plant and equipment and therefore they did not figure under Clause (b) of the explanation; that the Government has subsequently inserted Clause (d) to the Explanation with effect from 16-3-1995, whereby sub-clauses (i) to (x) were inserted into definition; that in this Explanation sub-clause (x) of Clause (d) stated that refractories are capital goods; that the Government has chosen to insert Clause (d)(x) into the [definition] of capital goods with effect from 16-3-1995 to extend the benefit of Modvat credits to refractories would mean that such refractories are not part of plant and equipments. The CA submitted that in the decision of Raipur Alloys case the Tribunal relied that parts and equipments are not eligible for Modvat credit under Rule 57A; that this understanding is contrary to the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Iron and Steel Works Ltd. held that the refractory bricks and other materials are used in the inner surface electric arc furnace by lining entire surface; that in that sense they could be broadly called constructional material for lining the machine to perform effectively; that refractory bricks are not in the nature of the material used into furnace for chemical reaction. They get excluded because of the Explanation of Rule 57A. In Mukund Iron and Steel Works Limited s case reported in 1990 (45) E.L.T. 84 this Tribunal had held that no Modvat credit shall be admissible on refractories. This ratio was followed subsequently in another case of Mukund Iron and Steel Works reported in 1990 (48) E.L.T. 552. We find that in the case of Singh Alloys the Hon ble Calcutta High Court has held that the decision of the Tribunal in the case of Satya Steel Strips and Mukund Iron and Steel Works Ltd. was wrong and that the Tribunal committed an error in interpreting the definition of inputs in the Explanation to Rule 57A. We also observe that the larger Bench of this Tribunal in the case of A.B. Tools Ltd. had held that Modvat credit in ramming mass used in or in relation to manufacture of ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alcutta High Court s decision in the case of Singh Alloys does not cover refractory bricks. We also find that the decision of this Tribunal in the case of Raipur Alloys the ratio of the decision of the Apex Court in the case of Ballarpur Industries Ltd., M/s. J.K. Cotton Spinning Weaving Mills Co., Doypack Systems Pvt. Ltd. and Mahalakshmi Oil Mills have been very lucidly brought out in the following paragraphs of 1995 (78) E.L.T. 44. The Paragraphs are 28 and 29 :- In the case of Collector of C. Ex. v. Ballapur Industries Ltd.-1989 (43) E.L.T. 804 (SC), the Hon ble Supreme Court had distinguished between the manufacturing process, and the manufacturing apparatus. They had observed that the relevant test was not the presence of the raw material in the end product but the dependence of the end product for its essential presence at the delivery end of the process. The ingredients go into the making of the end product in the sense that without its absence, the presence of the end product as such is rendered impossible. The Hon ble Supreme Court emphasised that this quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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