V.P. Gulati, Member (T)

1. This appeal is against the order of the Collector of Customs & Central Excise (Appeals), Madras. Brief facts are that the appellants are manufacturing unwrought zinc and in the process of manufacture use aluminium sheets in the electrolysis process. The aluminium sheets after use were discarded and sold as scrap. The appellants availed of MODVAT credit in respect of the Aluminium sheets to the extent of Rs. 85,132.18. The appellants were called upon to pay the amount of credit taken. The lower authorities have held that in terms of Rule 57A of the Central Excise Rules, the appellants were not eligible for the benefit of MOD-VAT credit of the duty paid on the Aluminium sheets, for the reasons that under Rule 57A (1) Aluminium sheets were part of the electrolysis equipment and since equipments were not covered by MODVAT Scheme being excluded for this purpose under Rule 57A, parts of the same were also not eligible.

2. The learned Counsel for the appellants pleaded that Aluminium sheets are used as cathodes in the electrolysis process for production of the unwrought zinc and the appellants took the credit after filing necessary declaration. He pleaded that the goods were used in relation to the manufacture of zinc. He pleaded that as it is Aluminium sheets are an essential item as in the case of Titanium Metal Anodes required for manufacture of caustic soda lye have been held to be eligible for MODVAT credit vide WRB decision reported in MANU/CM/0039/1989 : 1989 (41) ELT 424 (Tribunal) in the case of Gujarat Alkalies & Chemicals Ltd. v. CCE following the ratio of the Special Bench decision reported in MANU/CE/0070/1988 : 1988 (35) ELT 227. He pleaded that Aluminium sheets were specified in-puts under Rule 57A and unwrought zinc is also a specified final product.

3. Shri K.M. Vadivelu, the learned D.R. appearing for the Revenue pleaded that since equipments were excluded from the purview of Rule 57A under the MOD-VAT Scheme, the parts of equipments should also be taken to be excluded for the purpose of MODVAT credit.

4. The short point that falls for consideration is whether Aluminium sheets can be taken to have been used in or in relation to the manufacture of zinc. It is an agreed position that Aluminium sheets are used in the electrolysis process as cathodes and after use for some time these are discarded as waste metal and sold as such. It is not pleaded that the Aluminium sheets used for manufacture of unwrought zinc can be considered as an equipment by itself. It is seen that Aluminium sheets are used in the manufacturing process and after use for some time these have to be discarded as waste metal. Framers of the Rule, it is observed, have chosen to exclude certain categories of goods under Rule 57A for the purpose of MODVAT Scheme and the goods excluded are such which have to be in the nature of machines, machinery, plant, equipment, apparatus, tools or appliances. The plea of the Revenue is that Aluminium sheets are parts of Equipments and since equipments are excluded, parts of the same should also be taken to be excluded. No legal basis has been urged for this plea and there is no warrant to read the parts into the description of excluded category of goods under Rule 57A. No rule has been cited by the Revenue in support of this plea. It is observed that Aluminium sheets are an essential requirement in the electrolysis process and these have to be replaced from time to time after they lose their utility and the waste is sold as scrap. Use of Aluminium sheets is directly in the manufacturing process and since these cannot be treated as equipment by itself, use of the same has to be taken to be in relation to the manufacture of the specified final product under Rule 57A as in the case of Titanium Metal Anodes in respect of which MODVAT credit has been held to be admissible. It is observed that the term 'inputs' used under Rule 57A has a wider import. Aluminium sheets used being not equipment as