K. Sankararaman, Member (T)

1. M/s. Cans & Closures Ltd. have filed this appeal aggrieved with the Order-in-Appeal dated 26-2-1990 passed by the Collector of Central Excise (Appeals), Calcutta whereby he set aside the Order-in-Original dated 4-2-1989 passed by the Assistant Collector of Central Excise, Rishra Division, allowing the appeal filed by the Assistant Collector (Tribunal and Review) under the directions of the Collector of Central Excise, Calcutta-II. The Assistant Collector of Central Excise, Rishra Division had accepted their claim for grant of Modvat benefit in respect of cleaning reducer, coating reducer and vinyl reducers used by them in the manufacture of pilfer-proof caps and crown corks. On appeal by the department, as aforesaid, the Collector (Appeals) held that these goods do not constitute inputs used in the manufacture of the specified final products. He, therefore, allowed the department's appeal. The Assistant Collector's order was, therefore, set aside and the department's appeal allowed.

2. Shri B. Saha, learned Counsel for the appellants appeared for them during the hearing of the appeal. He submitted the Collector (Appeals) erred in holding that the cleaning compound merely cleaned the raw material and did not emerge in the manufacture of any final product and that the coating reducers and other reducers which are used to reduce the specific gravity of some products or as a diluent and are not used in the manufacture of any finished final product. The cleaning of the raw material is an essential process in the manufacture of their product and the inputs used for such cleaning purposes can definitely be said to be used in the manufacture of the finished products. In answer to a specific question from the Bench, Shri Saha replied that all the inputs are classifiable under Chapters and Headings which are covered by the Modvat provisions and do not stand excluded by the relevant provisions. Even in respect of thinners, the Department has now changed their stand and are extending the benefit of Modvat to them subject to their being classified under eligible Chapters and not the excluded Chapter of Petroleum Products. The use of thinners is for diluting the paints, inks etc. to make them suitable for use in the manufacture of the final product. The decisions cited by them before the Collector (Appeals) had not been considered by him on the ground that these did not relate to Modvat matters but relate to the earlier provisions. Shri Saha contended that these decisions were relevant for Modvat cases also as the scope of the said benefit was wider than the other schemes like proforma credit under Rule 56A or Notification 201/79. Even under these schemes, the decisions cited by them clearly provided that it was not necessary for the inputs to be present in the final product. The Modvat provisions are wider in scope as they cover not only goods used in the manufacture of the final products but also goods used in relation to their manufacture. In any case, there was no doubt that the products in question which are used for cleaning the paint or inks, are goods used in the manufacture of the final products. He relied upon the following decisions in support of his submissions :

(1) 1986 (26) ELT 1961 (Tri.) - Carbon Industries v. Collector of C.E., Madras Carbons as packing containers would be considered as inputs as visualised in Notification 201/79.

(2) 1982 (10) ELT 347 - Standard Alkali Chemical Division v. Collector of Central Excise (Appeals)

So long as any duty paid goods under Tariff Item 68 have been used for the manufacture of a finished product regardless whether the input constitute a component part of the finished product or not, a manufacturer shall be entitled to the benefit of Notification 178/77.

(3) MANU/CC/0010/1985 : 1985 (21) ELT 285 (CEGAT SRB) - Ferro Alloys Corporation Ltd. v. Collector of Central Excise, Guntur

Proforma credit under Rule 56A admissible to lignite used in production