COLLECTOR OF CENTRAL EXCISE, 'BANGALORE

MIS. ESCORTS MAHLE LTD.

MAY 6, 2003

[M.B. SHAH AND ARUN KUMAR, JJ.]

Central Excise and Salt Act, 1944; Section 35(G)/Central Excise Rules; Proviso to Rule 57 A:

MOD VAT credit on certain chemicals used in the manufacture of steel C product-Claims of-Held: Since use of these chemicals is essential for neutralizing the acidic vapours to prevent damages to the furnace in the manufacture of steel product, the final product, the assessees are entitled to MODVAT credit on these chemicals.

In these appeals Revenue challenged the eligibility of assessees to MODVAT credit on Ramming Mass, Fibre Glass and Filter Mesh used in the manufacture of steel pistons.

It was contended for the assessees that chemicals like Ramming Mass, Fibre Glass and Filter mesh have been used to neutralize the effect of acidic E vapours produced on melting of steel in the manufacture of steel pistons, the final product. Therefore, assessees were entitled to MODY AT credit on these chemicals.

Dismissing the appeals, the Court F

HELD: Keeping in view the manufacturing process of the steel wherein chemicals viz. Ramming Mass, Fibre Glass and Filter Mesh are used to control the acidic vapours generated during the steel manufacturing, this Court has held in Collector of Central Excise v. Steel Authority of India limiled• that use of such chemicals is essential in the G process of manufacturing of steel, the final product. Since manufacturing process used in the manufacture of steel pistons in the instant case was same, the asscssees were entitled to MODVAT credit on these chemicals, viz. Ramming Mass, Fibre Glass and Filter mesh. (1207-G; 1208-C(

1205 H

A *Collector of Central Excise v. Steel Authority of India ltd. iii C.A.No.661512003 decided by Supreme Court, relied on.

Electric Furnace Steel Making (American Institute of Mining)" Page 157, referred to.

B CIVlL APPELLATE JURISDICTION: Civil Appeal No. 5168-5170 of

2001.

From the Judgment and Order dated I. 12.99 of the Karnataka High Court in T.R.C. Nos. 3-5 of 1996.

WITH

C.A. Nos. 443/2002, 2128/97, 968, 1122 and 1810 of2003.

Raju Ramachandran, Additional Solicitor General, T.L.V. Iyer, Joseph Vellapally, Harish N. Salve, Ms. Vibha Datta Makhija, K.C. Kaushik, D Ms. Smita Inna, B. Krishna Prasad, Praveen Kumar, P.V. Patnakar, Nitin Bhardwaj, s.unil Kumar Jain, Kamal Mohan Gupta, A.K. Shahi, M.P. Sharma, P.C. Jain, Rajesh Kumar, R. Santhanam, Rajendra Singhvi, Ashok K. Singh, 'Ms. Meenakshi Arora and Ms. Mona Chettri for the appearing parties.

The Judgment of the Court was delivered by

ARUN KUMAR, J. These appeals are directed against the judgment of the Karnataka High Court while answering a Reference made under Section 35(G) of the Central Excise and Salt Act, 1944. The question relevant for our purpose is reproduced as under:

"Whether on the facts and in the circumstances of the case the appellate Tribunal is right in law in holding that the applicants are not eligible to MODY AT Credit in respect of Ramming Mass, Fibre glass and filter mesh used in or In relation to the manufacture of pistons on the ground that they are covered under Proviso to Rule 57 A of the G Central Excise Rules."

In order to appreciate the controversy, the relevant facts are that the assessees claimed benefit of MODY AT Credit in respect of Ramming Mass, Fibre glass and filter mesh. These items are used in the process of manufacture of steel and without the use of these item, s the end product cannot be produced.

H The assessees in these cases are engaged in the manufacture of items of steel

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C.C.E. v. ESCORTS MAHLE LTD. [ARUN KUMAR. J.] 1207

like pistons in the Escort's case. The nianufacture takes place in electric arc A furance refractories. It is submitted on behalf of the assesses tht during the course of manufacture steel is melted at a very high temperature. Steel produces acidic vapours when melted at such a high temperature. To contain the vapour and neutralise them chemicals like dolomite or magnesite are used during the course of manufacturing process. Ramming Mass, fibre glass and filter mesh B are processes in which chemicals are used to line the furances to neutralise the effect of acidic vapours produced during the course of melting steel.

Unless these chemicals are used, the furance may burst. Accordingly, it is

I submitted on behalf of the assesses that thee chemicals being necessary inputs in the process of manufacture of steel items, MODY AT Credit has to be allowed on them.

In respect of this contention that it is necessary to use such processes like Ramming Mass, the learned counsel. appearing for the assessees drew our attention to a book titled as "Electric Furance Steel Making (American

Institute of Mining)" wherein while dealing with electric arc furance

refractories, it is stated on page 157 as under: D

"It is well know that much of steel making and refining is concerned not only with the removal of carbon to steel chemistry ranges but also with the removal of phosphorus and sulfur to appropriately low values.

Since phosphorus and sulfur are chemically acidic materials, their removal from the melt is effected by combining them with the basic E material lime (CaO) which holds them in the slag. However, for the lime to function in this role it must be allowed to react with the sulfur or phosphours in the melt and not with the silica from the refractoriesa more acidic material than phosphorus or sulfur, Accordingly a basic refractory-lined container (of dolomite or magnesite) is provided to p allow the removal of the undersirable phosphorus and sulfur from the melt to the slag without excessive corrosion of the refractory lining."

Keeping the aforesaid manufacutring process in view and also bearing in mind that it is essential to control the acidic vapours generated during the steel manufacturing process, this Bench has held in C.A.No. 6615/2003 G Collector of Central Excise v. Steel Authority of India Limited that use of such chemicals is essential for the manufacturir.g process. Specifically, it was observed that:

"As discussed by the concerned authority burnt dolamite is used so as to neutralize the acid which is formed at the time of H

manufacturing steel. This burnt dolamtie is, therefore, used in relation to manufacturing of the final product. It has been rightly pointed out that respondent is using burnt dolamite in relation to manufacture of final product so that it may combine with acid which is formed at the time of manufacture of the steel and neutralize the said acid so that it may prevent damage to the furnace. But the used burnt dolamite is for neutralizing the acid form in the course of manufacture of steel.

Hence, the judgment cannot be said to be, in any way, illegal or erroneous. The appeal is, therefore, dismissed. There shall be no orders as to costs."

C Manufacturing process being the same in these cases, we hold that the assesses are entitled to MODY AT Credit on Ramming Mass, Fibre glass and filter mesh.

The appeals are accordingly dismissed with no order are to costs.

S.K.S.

Appeals dismissed.

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