Per: Shri R. lavaraman. M (T)

This is an appeal against the Order in Original No. 11/MP/93 dt. 23.3.93 passed by the Collector of Central Excise, Baroda. In the said order, the Collector has confirmed the demand for a total amount of Rs. 12,49,180.53 under Rule 57-I of the Central Excise Rules by invoicing the extended period. The Collector has also imposed a penalty of Rs. 5 lakhs on the appellant under Rule 173Q(1) of the Central Excise Rules.

2. The appellants are engaged in the manufacture of caustic soda, chlorine, H.C.L, Chloromethanes, and sodium cynide. They tiled declaration for availing Modvat credit in respect of various inputs. The impugned inputs involved in this appeal are caustic soda, Hydrochloric acid and Ion Exchange resins limited to their usage in the effluent treatment plant. The other inputs are M.E.G (Mono Ethylene Glycol) and Mefron/Freon gases, which are used in the chilling plant. Modvat credit was sought to be denied on the ground that Freon/Mefron gases are used in respect of functioning of refrigeration plant and they cannot be construed to be inputs used in or in relation to the manufacture of the final product. They are used only for operational need of the refrigeration plant, which is a plant and machinery hit by exclusion clause under Rule 57A and hence cannot be allowed Modvat credit. Likewise, M.E.G. is alleged to be used in brine solution for chilling purposes in the chilling plant and hence it is for the operational need of the refrigeration plant-. As regards caustic soda, hydrochloric acid and Ion Exchange resin, used in the effluent treatment plant, it was held by the Collector that it is not in or in relation to the manufacture of the final product; but are used only in the effluent treatment, before discharge of the effluent. Hence such usage cannot be said to be used in or in relation to the manufacture of the final product. The demand covers the period from 1.3.86 to 31.5.90 and the show cause notice is dt. 5.2.91. The Collector has invoked the extended period alleging that they have suppressed the material facts relating to specific usage of these inputs and hence held that extended period can be invoked. For availing irregular Modvat, a penalty of Rs. 5 lakhs also has been imposed. The present appeal is against the aforesaid order.

3. Shri D.M. Mehta the ld. consultant refers to the process of manufacture of sodium cyanide in the appellant's factory, the details of which are given in the paper book. From this write up, we find that Mono ethylene glycol is used as brine solution, which is chilled to about 0 - 5 degrees C. in refrigeration system and circulated in the pipeline to maintain the temperature of H.C.N. for the manufacture of Sodium Cyanide at O degree C. For purpose of anti freezing of the solution in circulation, ethylene glycol is used. Freon/Mefron gases are used as refrigerent gases in the chilling plant. Chilled water is used in the condensor for cooling refrigeration system. In their effluent treatment plant, they use caustic soda lye, liquidified chlorine, Hydrochloric acid and Ion exchange resins for destroying the traces of sodium cyanide in the effluents before discharge of the effluents outside. Shri Mehta, pleads that in regard to Monoethylene glycol it is used as brine solution in the chilling plant for maintaining the temperature of HCN at O degree C, If the raw material is not maintained at this temperature, chemical reaction with caustic soda for the manufacture of NACN could not be obtained. Hence it is an essential input used in relation to the manufacture of sodium cyanide. In the case of Freon/Mefron gases, he seeks to rely on this Bench decision in their own case vide Order No. 247-49/95WRB dt. 20.2.95. As regards caustic soda, Hydrochloride acid and Ion Exchange resins used in the effluent plant, he would plead that the finished product involved is sodium cyanide, which is a highly poisonous chemical and any trace of it cannot be permitted to be d