IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA Excise Petition No. 3 of 2001 along with Ex. Pet. Nos. 4/01, 5/01 & Excise Reference Nos. 5/01, 12/01, 13/01, 14/01,15/2001 & 7/2003, Judgment reserved on: 27.8.2008 Date of decision : September 3, 2008 1. Excise Pet. No. 3/2001 Commissioner of Central Excise …Petitioner(s). Versus. M/s Steel Strips Alloys Ltd. & anr. …Respondent(s). For the Petitioner (s):Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent (s): Mr. K.D.Sood, Advocate. __________________________________________________________________ 2. Excise Pet. No. 4/2001 Commissioner of Central Excise …Petitioner(s) Versus. M/s Steel Strips Alloys Ltd.& anr. ..Respondent(s) For the Petitioner(s):Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent(s): Mr. K.D.Sood, Advocate. __________________________________________________________________ 3. Excise Ref. No. 5/2001 Commissioner of Central Excise …Petitioner(s) Versus. M/s Steel Strips Alloys Ltd.& anr. …Respondent(s) For the Petitioner(s): Mr. Sandeep Sharma, Assistant Solicitor General of India. 2 For the Respondent(s): Mr. K.D.Sood, Advocate. __________________________________________________________________ 4. Excise Ref. No. 5/2001 Commissioner of Central Excise …Petitioner Versus. M/s Steel Strips Alloys Ltd. …Respondent For the Petitioner: Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent: Mr. K.D.Sood, Advocate. __________________________________________________________________ 5. Excise Ref. No. 12/2001 Commissioner of Central Excise …Petitioner Versus. M/s Steel Strips Alloys Ltd. …Respondent. For the Petitioner: Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent: Mr. K.D.Sood, Advocate. __________________________________________________________________ 6. Excise Ref. No.13/2001 Commissioner of Central Excise …Petitioner Versus. M/s S.A.B. Industries Paonta Sahib . …Respondent. For the Petitioner: Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent: Mr. K.D.Sood, Advocate. __________________________________________________________________ 7. Excise Ref. No. 14/2001 Commissioner of Central Excise …Petitioner Versus. 3 M/s Steel Strips Alloys Ltd. & anr . …Respondent(s) For the Petitioner (s):Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent (s): Mr. K.D.Sood, Advocate. __________________________________________________________________ 8. Excise Ref. No. 15/2001 Commissioner of Central Excise …Petitioner Versus. M/s Steel Strips Alloys Ltd. …Respondent. For the Petitioner: Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent: Mr. K.D.Sood, Advocate. __________________________________________________________________ 9. Excise Pet. No. 7/2003 Commissioner of Central Excise …Petitioner Versus. M/s Steel Strips Alloys Ltd. …Respondent. For the Petitioner: Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent: Mr. K.D.Sood, Advocate. __________________________________________________________________ Coram: The Hon’ble Mr. Justice Deepak Gupta, Judge . The Hon’ble Mr. Justice V.K.Ahuja, Judge. Whether approved for Reporting ? Yes For the Petitioner(s) : ( See above ). For the Respondent(s): “ 4 Deepak Gupta, J . All the aforesaid Excise and Reference Petitions are being disposed of by a common judgment as the following common questions of law are involved in all the cases. “1. Machine, machinery, plant, apparatus, tool or appliances, etc., used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of final produce are ineligible for Modvat Credit under the exclusion clause of explanation to Rule 57A. Ramming Mass, Foundry Flux, Mortar, ILR MIX and Castable Powder are used as part of furnace. Therefore, will not the Ramming Mass, Foundry Flux, Mortar ILR MIX and Castable Powder be covered in the excluded category of item of explanation to Rule 57A? 2. The term machine, machinery, plant etc., have been used in the exclusion clause (1) to Rule 57A in a general sense. If their constituents are taken as inclusive input when the plant or machine are not, will not the exclusion become superfluous and meaningless?” To decide the aforesaid questions, it would be relevant to refer to the explanation under Rule 57A, relevant portion of which reads as follows:- “Explanation – For the purpose of this rule, “inputs” includes— (a) inputs which are manufactured and used within the factory of production in or, in relation to, the manufacture of final products, and (b) paints and packaging materials, 5 but does not include --- (i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing or any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products;” The manufacturers claimed that the Ramming Mass, Foundry Flux, Mortar, ILR MIX and Castable Powder are inputs required for manufacture of the final products and, therefore, they are entitled to Modvat Credit for the same. On the other hand, the stand of the revenue is that these inputs are not required for the manufacture of the goods but are in fact material which is required for the maintenance of the plants, machinery etc., and are thus not included in the definition of inputs. The short question to be decided in the present petitions is that whether Ramming Mass, Foundry Flux, Mortar, ILR MIX and Castable Powder are inputs or not?. Shri Sandeep Sharma, learned Assistant Solicitor General has relied upon a judgment of the Karnataka High Court in 1998 (98) ELT 81, titled Canara Steel Ltd. versus. Union of India & others, wherein the Karnataka High Court had dis- allowed the claim of the manufacturer for the grant of Modvat Credit benefit by holding that Ramming Mass etc., are used as lining material and insulating material for electric arc furnaces 6 and are also used for the brick lining and they have nothing to do with the manufacture of the final goods and therefore, have to be treated as a part of the machinery and not as an input. On the other hand Shri K.D.Sood leaned counsel for some of the manufacturers has relied upon the judgment of the Apex Court in 2003(154) ELT 321 (SC) Commissioner of C.Ex., Bangalore versus Escorts Mahle Ltd., wherein also the question was whether the manufacturer was entitled to Modvat Credit instead of Ramming Mass, Fibre glass and filter mesh. The Apex Court held that these were inputs within the meaning of Rule 57A and held that the assessee was entitled to Modvat Credit on these items. The items in the present case are almost identical and used for similar purpose. Similar arguments have been raised. We are of the considered opinion that these cases are squarely covered by the judgment of the Apex Court in Escorts Mahle’s case (supra). In view of the above discussion, we answer question No.1 by holding that Ramming Mass, Foundry Flux, Mortar, ILR MIX and Castable Powder are inputs within the meaning of explanation to Rule 57A and hence MODVAT can be claimed in respect of the same. As far as question No.2 is concerned, we are of the considered view that by holding the aforesaid items to be inputs, the definition of machine, 7 machinery, plant etc., is not changed and exclusion clause does not become superfluous and meaningless. Both the questions are answered in favour of the assessee and against the revenue. Consequently, the Excise Petitions are rejected and the Excise References are answered in favour of the assessee and against the revenue. (Deepak Gupta ), J. September 3, 2008 ( V.K.Ahuja ), J. s.