P.K. Desai, Member (J)

1. Both the appeals are directed against the Order-in-Appeal No. KW/308/91 BRD dated 31-10-1991 of the Collector of Central Excise (Appeals) Bombay confirming Orders-in-Original Nos. 57/91 and 58/91 dated 21-3-1991 of the Asstt. Collector of Central Excise Div. IV Vadodara disallowing MODVAT credit in respect of Nitrogen Gas used in or in relation to their final product MMA Monomer, and confirming the demand for Rs. 26,585.83 and Rs. 15,895.95 for the period April 1990 to August 1990 and September 1990 to December 1990 respectively.

2. The appellants are the manufacturers, amongst others, of an item known as MMA MONOMER, and have opted for the benefit under the MODVAT Scheme, claiming Nitrogen gas as used in relation to their final product, they took the credit for the duty paid on the said gas. The jurisdictional Range Superintendent, however served two show cause notices dated 20-9-1990 and 30-1-1991, alleging that such a credit was not available to them as the Nitrogen gas did not act as an input in their final product, and called upon the appellants to show cause to the jurisdictional Asstt. Collector, why the amounts (as subsequently confirmed) should not be demanded on account of wrong availment of the credit. The appellants in reply thereof, however pleaded that Nitrogen gas was declared as an input and MMA MONOMER as the final product for availment of Modvat Credit, vide Rule 57A of the Central Excise Rules, and vide their declaration dated 19-3-1986, they had already declared Nitrogen gas as an input in manufacture of their final product MMA Monomer, and had obtained the dated acknowledgement and that thereafter they had been maintaining appropriate accounts therefore and had been submitting monthly RT 12 returns also. As to the use of Nitrogen gas, they pleaded that the gas was used as inert which did not react with the other chemicals and induction of the same during the reaction in the reactor was essential technological necessity to create inert atmosphere. According to them, Hydrocyanic acid (HCN), one of the input for manufacture of MMA Monomer, was being received from IPCL by gravity, in liquid form, in their buffer vessel, and the same having very low boiling point i.e. 26°C temperature, and there being a possibility of continuous evaporation and a possibility of the same getting polymerised and chocking of the pipelines, as also evaporated HCN going to the incinerator, or pressuring in the storage vessel creating hazardous condition, because of the poisonous material of HCN, blanketing by an inert gas was absolutely essential and that Nitrogen gas was being used as such. They pleaded that, though Nitrogen gas

did not go into the product mix nor did it effect any chemical reaction in the product, the same was consumed in relation to the final product as, but for the said inert gas, the desired final product would not be available. Adjudication proceedings were conducted and the Asstt. Collector came to the conclusion that the Nitrogen gas was being used only to create inert atmosphere for safe and continuous operation of the plant, where MMA Monomer was being manufactured but the same did not take part in chemical reaction. According to him the gas at best, could be said to have been used as requirement of the process and not as an input, and could be said to have been used to create inert atmosphere but not in or in relation to manufacture for the purpose of Rule 57A of the Rules. He therefore disallowed the credit and confirmed the demands. In the appeal, the Collector of Central Excise (Appeals) also concurred with the finding of the Adjudicating Authority and confirmed the order.

3. Mr. N.I. Mehta, the learned Advocate for the appellants, has reiterated the contentions raised in the reply to the Show Cause Notice and has pleaded that Rule 57A of the Central Excise Rules, has permitted availment of MODVAT Credit also for the items used "in relation" to the manufacture of the final pr