K. Sankararaman, Member (T)

1. M/s. Associated Cement Companies have filed this appeal against the order in appeal dated 10-06-1988 passed by the Collector of Central Excise (Appeals), Calcutta, rejecting their appeal in respect of various items claiming benefit of modvat credit as inputs used in or in relation to the manufacture of cement. He allowed the appeal only in respect of grinding media.

2. Shri R.M. Das, learned consultant, argued their case when the appeal came up for hearing. He strongly contended that the goods are definitely eligible for the mod-vat benefit as they satisfy the criteria laid down in Rule 57A being goods used in or in relation to the manufacture of cement. The expression "used in relation to the manufacture" is very wide and would cover the goods in question. He referred to the detailed submissions in the appeal and pleaded that the appeal may be allowed.

3. The arguments were resisted strongly by Sri M.N. Biswas, learned SDR. He supported the order of the Collector (Appeals) which he said correctly reflected the legal position. He pleaded that the appeal may be rejected. The goods for which modvat credit has been claimed, chapter number under which they fall and the manner of use have been furnished by the appellants in the appeal. These are shown in the annexure to this order. The Collector (Appeals) has observed in his order that modvat credit has been claimed on some of the products like even tyres, tubes, iron and steel angle, channels used for general structural and maintenance purposes, railway construction materials, parts and accessories of motor vehicles for example certain items are required for maintenance purpose. He has concluded that such items can, by no stretch of imagination, be considered as inputs used in or in relation to the manufacture of cement. It is this finding which is under challenge in the present appeal.

4. In their appeal memorandum the appellants have referred to the judgment of the Hon'ble Supreme Court in J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer, 1985 (16) STC 563 and MANU/SC/0269/1964 : AIR 1965 SC 1310, wherein it was held that the expression used in the manufacture of goods should normally encompass the entire process carried on of converting raw materials into finished goods 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 goods required in that process would fall within the expression "in the manufacture of goods". The expression used in or in relation to the manufacture of the final product further widens the scope of the input for which credit of duty is permitted. The rule excludes only machine, machinery, plant equipment parts, tools or appliances used for producing the goods. Reliance has also been placed on certain decisions of Cegat on input relief. In MANU/CE/0270/1985 : 1986 (25) ELT 297 (Tribunal), it was held by the Tribunal that inputs are used directly or indirectly in the manufacture of finished products. Hence even inputs used in the manufacture of intermediate products which alone went into the manufacture of the final products were held to be entitled to exemption. There is nothing in the Modvat Rules militating against this interpretation. Again in MANU/CE/0122/1985 : 1985 (21) ELT 901 (Tribunal), the Tribunal held that direct utilisation is not necessary for the substance to be called an input. In the circumstances the appellants submit that the items mentioned in the list are entitled to Modvat benefit. They have added in conclusion that items like (i) diesel oil used for quarrying of limestone, raw material for cement (ii) explosives used as direct input in blasting of limestone (iii) refractory bricks used in kilns for manufacture of intermediate stage of cement (iv) castings of iron steel used as lining plates in cement mills. Raw Mills and Ball Mills are all consumabl