Per V.P. Gulati :

This appeal arises out of the order of the C.C.E. (Appeals), Bangalore. Under the impugned order, the appellants have been denied the benefit of modvat credit in respect of certain inputs.

2. The learned Consultant has urged as under in respect of each one of them :

(1) Oxygen in Cylinder/Dissolved Acclytene

The learned Consultant has referred us to the use as stated in the notes submitted. It is clear from the note that both the oxygen and acclytene are being used for maintenance of the equipment. The use therefore cannot be considered in or in relation to the manufacturing process.

Heard the learned DR.

This Tribunal has held in a number of cases that the inputs which are used for the purpose of maintenance of the equipment, the same would not be eligible for the benefit of modvat credit. In view of the above, we hold that the plea of appellants cannot be accepted.

(2) Sulphuric Acid:

The learned Consultant has referred us to the use as stated in the notes submitted. The use of the sulphuric acid is for treatment of water which is used in the cooling system and not as an inprocess material. Cooling system is an equipment and the water used is to make this functional.

Heard the learned DR.

In that view of the matter, the use cannot be held to be in or in relation to the manufacture of the declared product, namely cement. Hence, the plea of the appellants cannot be accepted in this regard.

(3) Hydrochloric Acid/Caustic Soda:

The use is for regeneration of the resins which is a separately activity. The resins by themselves which participate in the process leading to the generation of power to be used in the plant may have a case for being considered as an input as the process of regeneration of the same is for the start of the manufacturing process.

Heard the learned DR.

For the above reason these inputs can be considered to be an use in or in relation to the manufacture of the finished product. Therefore, these inputs are eligible for the benefit of the MODVAT Credit following the ratio of our decisions earlier. This Tribunal in the case of CCE Vs. Seshasayee Paper Boards Ltd. reported in 1992 (61) ELT 304 has observed as under in para 4:

4. We observe that the issue with regard to the use of Hydrochloric Acid and other items which are used in the paper making Unit has been considered by the Tribunal in the case of Andhra Pradesh Paper Mills Ltd. Vs. Collector of Central Excise, reported in 1990 (50) E.L.T. 252 in the light of the judgement of the Hon'ble Supreme Court in the case of J.K. Cotton Spg. and Wvg. Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur (1985) 16 S.T.C. 563 (SC) and also in the case of C.C.E., Calcutta-II Vs. Eastern Paper Industries Limited, reported in 1989 (43) E.L.T. 201 (SC) = 1990 (26) E.C.R. 10 (SC) wherein the Hon'ble Supreme Court held that so long as it can be shown that the material used as inputs have a nexus with the process which is integrally connected with the ultimate production of goods till the same are fit for being put in the marketing stream and such process is so integrally connected with ultimate production of goods that it would be commercially inexpedient to produce the finished goods without that process, all such inputs would get the benefit of credit of duty. In that case the materials used for softening of water were held to be eligible for MODVAT Credit. We have held that Hydrochloric Acid which is used for cleaning of wire mesh would not be eligible for the benefit of MODVAT Credit. At the same time we have held that the process which is in the nature of heat treatment of water can be taken to be process in or in relation to the manufacture of paper and the inputs used therein would be eligible for the benefit of MODVAT Credit even when the treated materials are used in the manufacturing stream of the finished goods either directly or by further process like generation of steam from water. In the present case we find that use of the Hydrochloric Acid is for demineralisat