K. Sankararaman, Member (T)

1. The appeal before us is by Collector of Central Excise, Calcutta-II whose delay in filing it had been condoned by us earlier. The appeal is directed against the order-in-appeal passed by Collector of Central Excise (Appeals) holding that in respect of oxygen gas and dissolved Acetylene Gas, received by M/s. Hindustan Development Corporation Ltd., the present respondents, which prior to 1-3-1986 had been utilised by them in the manufacture of bogies and couplers which were cleared on payment of appropriate duty after the said date, they were entitled to avail themselves of the credit and its disallowance by the Assistant Collector was therefore not called for. He, therefore, set aside the confirmation of demand relating to these two items with directions for the grant of relief to the respondents.

2. The present appeal directed against the aforesaid order proceeds on the basis that the order of the Assistant Collector disallowing the credit was in conformity with the relevant provisions of law and the order-in-appeal setting it aside is not legal and proper. The Assistant Collector passed his order based on the show cause notice which raised two issues

(i) Oxygen Gas and Dissolved Gas were received and utilised prior to 1-3-1986 i.e. prior to coming into effect of the Modvat Scheme;

(ii) These were utilised in the manufacture of the intermediate products which were exempted under Notification and not used in the manufacture of the assessee's finished products viz. Bogies and Couplers.

The Assistant Collector gave a hearing to them before deciding the issue. From a record of the personal hearing enclosed with the present appeal it is seen that the Company had admitted that though these were received during the month of February, 1986 and were not in stock on 1-3-1986, the finished products manufactured out of these were cleared after 1-3-1986. They also contended that they use these goods for making steel castings, the intermediate product for bogies and couplers, the final product. Steel castings are exempted under Notification No. 217/86, dated 2-4-1986. Provisions of Rule 57D of Central Excise Rules, 1944 will be applicable to them.

3. The Assistant Collector's Adjudication Order No. 33/86, dated 19-11-1986, inter alia, disallowing credit on oxygen and dissolved acetylene gas was, however, based on the limited criterion that these were received and consumed by the assessee prior to 1-3-1986. He accordingly concluded that "they do not merit any credit to be taken for duty paid on them".

4. The Collector (Appeals) reversed the order of Assistant Collector for the reasons discussed earlier and thereby this present appeal.

5. In the appeal before us, the following points have been raised:

(i) Both the allegations raised in the show cause notice which had been raised were virtually admitted by the assessee in their reply to the show cause notice and during the personal hearing, emphasising however the point that the finished products manufactured were cleared after 1-3-1986.

(ii) The appeal then refers to Rule-57J (relating to utilisation of Modvat Credit on specified raw materials in the manufacture of the specified intermediate products subsequently used for the manufacture of the specified final products) and Notification No. 361/86, dated 20-6-1986 issued under the above-said Rule. The appeal makes it out that the first proviso as well as the second proviso of the said Notification have not been satisfied in the present case by the Company (respondents in the present appeal). It is stated that the first proviso lays down that intermediate products are to be manufactured in a factory as job work. This is not the case here as the steel castings are their own product and utilised by them in their own factory for the manufacture of final products viz. Bogies and Couplers. Regarding the second proviso it is stated that it lays down that no credit shall be allowed unless the intermediate product is accompa