Per Jyoti Balasundaram :

The sole issue for determination in all these appeals is the eligibility for modvat credit of caustic soda, hydrofloric acid, hydrochloric acid, nitrogen gas and oxygen gas used as inputs in the manufacture of monochrome picture tubes. The Appellants herein are engaged in the manufacture of picture tubes for black and white TV sets classified under Chapter 85 CETA, 1985. The inputs and outputs are covered by the modvat scheme and were duly declared to the Department. Show cause notices were issued seeking to deny modvat credit on the ground that the disputed items were in the nature of apparatus/appliances and, therefore, not covered by the definition of inputs in terms of Rule 57A of the Central Excise Rules. The Assistant Collector confirmed the denial of modvat credit on the items in question and the lower appellate authority upheld the orders of the adjudicating authority. Hence these appeals, as follows :

2. We have heard Shri S. Madhavan, learned Advocate and Shri K.N. Gupta, learned SDR.

3. The process of manufacture of television picture tubes consists of many operations. Enclosed is the process - flow chart for the manufacture of Black and White picture tubes (Annexure-I). Essentially the manufacturing process can be split into processes concerned with manufacturing the front end and back end of the picture tube. Whereas the front end process total 10 in number, there are 7 different operations connected with the back end process. The basic raw material for the manufacture of TV picture tube is the glass shell. The initial operation consists of an elaborate washing of the inert glass shall with a mixture of deionised water and hydrofloric acid. Thereafter the active glass shell is coated with phosphorus and potassium silicate prior to which a thin film of lacquer is coated on to the shell. Thereafter, graphite coating, aluminising and inspection of the glass shell under ultraviolet rays is carried out.

Thereafter, another major item of inputs namely electron gun is sealed on to the glass shell. Subsequently, vacuuming and degassing under high temperatures and high current is carried out. The next three processes of banding, graphite painting as well as painting with silicon resin is carried out. The final Q.C. test is, thereafter carried out on the finished product and the Q.C. cleared product is packed in cartons and is ready for shipment. The nature and purpose of the input material and their functions in the manufacturing process is described below:

Caustic soda : The glass shell is the principal raw material used in the manufacture of picture tubes, glass is a highly inert material and needs to be transformed into active material in order to enable it to undergo further processing. The glass shell is washed with a mixture of deionised water and hydrofloric acid. Deionised water is pure water which is obtained by the treatment of raw water in the ion exchange process. A resin is used in the ion exchange process in order to deionise water. The resin is subsequently regenerated by treatment with caustic soda. The process of regeneration refers to the process whereby the ion impurities which are removed from raw water in the deionisation process and which now form part of the resin are removed from such resin so as to restore the resin to its original quality. It can be seen that caustic soda is an essential input for the process of deionisation which is essential for the manufacture of TV picture tubes out of inert glass shells.

Hydrofloric Acid : The Chemical wash of the inert glass shell consists of a mixture of deionised water and hydrofl