R. Jayaraman, Member (T)

1. This is an appeal directed against the order of the Collector of Central Excise (Appeals), Bombay bearing No. R-642/BII-249/88 (File No. V-2(CH. 72) 1012/88) dated 24.11.1988 rejecting the appellants appeal for availment of MODVAT benefit in respect of certain inputs used in or in relation to the manufacture of iron and steel castings.

2. Brief facts for the purpose of disposal of this appeal are as below:

3. The appellants are engaged in the manufacture of iron and steel articles. They applied for availment of the MODVAT benefit of the following inputs, namely Acetylene gas, flourspar, binders (foundry chemicals), sleeves, graphite stopper head, fireclay, ramming mass and refractories. The department objected to the availment of MODVAT benefit in respect of the aforesaid duty-paid inputs on the ground that they are not admissible under the relevant rules in MODVAT scheme. In the adjudication proceedings initiated by the Assistant Collector, it was held that these inputs are not eligible for availment of MODVAT credit and confirmed the demands raised under the show cause notices dated 3.10.1987, 6.1.1987, 16.4.1987, 23.4.1987, 6.7.1987, 6.10.1987 , and 4.11.1987. In the said order, he allowed the MODVAT benefit in respect of duty in respect of graphite electrodes along with nipples to the extent of Rs 1,27,020.60 and also Rs. 8838.00 being the credit taken on thermocouple tips. Against the said order, the appellants went in appeal before the Collector of Central Excise (Appeals), which was rejected. The present appeal is against the order of the Collector of Central Excise (Appeals).

4. Shri T. R. Andhyarujina, the learned senior advocate for the appellants, at the outset stated that in the case of refractories, the matter has already been argued by him and the issue also has been decided in favour of the revenue under order No 617/89 dated 4.7.1989. Since the issue is already settled, he is not arguing with regard to the eligibility of the input benefit in respect of refractories. As per the aforesaid decision, MODVAT credit in respect of refractories is not eligible and demand in respect of the same is enforceable. However, as regards other inputs, his arguments were as under. Before dealing with each item of inputs, his general argument is that in the case of all the inputs they are very necessary for the manufacture of steel castings and they are used in or in relation to the manufacture of steel castings and it is not disputed that both inputs as well as the final product are notified under the MODVAT scheme. The dispute is only with regard to whether these will be covered by the explanation to Rule 57A of the Central Excise Rules or would be hit by the explanation.

5. Shri K. M. Mondal, the learned SDR, for the department, made the general argument that Rule 57A of the Central Excise Rules is the rule dealing with the applicability of MODVAT scheme. According to this Rule both the inputs as well as the final product are required to be notified. Even if they are notified, they should be used in or in relation to the manufacture of the final product. Even if they are so used, in or in relation to the manufacture of final product, MODVAT credit can be given only, if they are coming within the purview of explanation to Rule 57A. He, therefore, contended that the issue is to be considered in the light of the aforesaid provisions for coming to the correct conclusion.

6 In order to avoid repetition of the arguments with regard to the applicability of MODVAT credit in respect of each individual input, we purpose to deal with the arguments of both the sides and give our findings with regard to each of the input.

I. Refractory, Ramming Mass and Fireclay

7. Shri T. R. Andhyarujina, the learned senior advocate for the appellants, fairly conceded that in the case of refractories, this Bench in its order No. 617/89 WRB dated 4.7.1989, while disposing of the appeal filed by the same appellants in Appeal No. E/1