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A.P. Paper Mills Vs. C.C.E. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Hyderabad
Decided On
Judge
AppellantA.P. Paper Mills
RespondentC.C.E.
Excerpt:
.....mesh, lm cloth, dandu cloth etc. pulp with excess water comes from the pulp making machine to the paper wire mesh. pulp particles remain on the wire mesh and web of pulp fibre is formed. it moved on moving wire mesh (endless) and is allowed to fall on felt (cotton, woollen or synthetic). the moving felt carries the pulp web to the drier and is calendared or pressed being wound on rolls and treated further. wet paper is passed between dandy rolles covered with dandy cover so as to smoothen the surface of the paper. these articles are damaged in the process and require replacement periodically. they are replaceable goods used in the paper making machine in the course of manufacture of paper. they can be regarded in a way as parts of the paper making machine or machinery used in the.....
Judgment:
1. The issue arising for consideration is whether hydrochloric acid and wetnol used for cleaning of machinery in the appellant's factory are eligible for modvat credit. The learned Counsel for the appellant Shri K.R. Natarajan points out that the issue is no more res integra inasmuch as Tribunal has held that items used for cleaning purposes are eligible for modvat credit. He has in this connection referred to the decision of this Tribunal in Triveni Engg. Industries Ltd. vs. C.C.E., Meerut - 1999 (105) ELT 427 (T) wherein the Tribunal held that soda ash and caustic soda used for cleaning of various machinery in manufacture of sugar are eligible for modvat credit under Rule 57A, the decision of the Tribunal in the case of Rajasthan State Banganagar Sugar Mills vs.

C.C.E., Jaipur - 1999 (III) ELT 682 wherein the Tribunal held that caustic soda flakes used for descaling of brass tubes are admissible for modvat credit and decision of the Tribunal in the case of UP State Sugar Corporation vs. C.C.E., Allahabad - 2000 (122) ELT 172 (T) where the Tribunal held that organic surface active agents used for cleaning pipes and tubes which transport intermediate products during the process of manufacture sugar in a factory are entitled to modvat credit. It is the learned Counsel's contention that the items in question are closely comparable in their use in relation to the production of paper. He also clarifies that the earlier decisions of the Tribunal in the appellant's own case in 1990 (50) ELT 252 is no more good law as that order remains averruled by the decision of the Larger Bench in the case of Union Carbide India Ltd. vs. C.C.F., Calcutta I. He has also relied on the decision of the Apex Court in the case of Collector of Central Excise, Pune vs. Tata Engineering and Locomotives Co. Ltd. - 2003 (158) ELT 130 (SC) wherein the Apex Court held the words used in or in relation to the manufacture of the final products has a broader scope than the words like used for producing or processing of any goods' and goods for bringing about any change in any substance'.

2. We have perused the records and considered the submissions made by both sides. We find that in Union Carbide India Ltd. case, the Larger Bench of this Tribunal went into the scope of the words used in or in relation to the manufacture' and observed as under : 17. There can be no doubt that the Rule-making authority incorporated the words "in relation to the manufacture" in Rule 57A to widen and expand the scope, meaning and content of the expression "inputs". Where the language is clear and unambiguous, full effect must normally be given to such language. By no interpretive process, the deliberate design of the Rule-making authority can be frustrated nor words and expressions disregarded as otiose. The wide impact of the expression "used in relation to the manufacture" must be allowed its natural play. Raw materials (as commonly understood) are used in the mainstream of entire process of converting raw materials into finished products or any other process integrally connected with the ultimate production of finished products. What then is the purpose of incorporating the words "in relation to the manufacture" in Rule 57A? The purpose is certainly to widen further the scope, ambit and content of "inputs". The purpose is to widen the ambit so as to attract also goods which do not enter directly or indirectly into the finished product, but are used in any activity concerned with or pertaining to the manufacture of finished goods. The only direct decision of a High Court on this aspect is that of the High Court of Calcutta in Singh Alloy Steel Ltd. v. A.C. of C.E.- 594. Goods which are not raw materials converted into finished products and which are charged into furnace as fettling materials to dissolve and seal the crevices in the refractory walls of the furnace and are consumed in the process have been held to be goods used "in relation" to the manufacture of finished goods. The High Court explained that the exclusion clauses of the Explanation to Rule 57A relate to items which would otherwise have come within the definition of inputs. This would mean that machine, machinery and other goods referred to in exclusion Clause (i) would, but for the exclusion fall, within the ambit of the expression "inputs" that is, "goods used in relation to the manufacture of finished products".

The Court stated that it does not matter that the goods are used in the machinery or for the purpose of the machinery. In the absence of any contrary decision of the Supreme Court or any other High Court, the Tribunal is required to follow this decision of the High Court of Calcutta. It would be an act of Judicial indiscipline and impropriety not to follow the only decision of a High Court on this aspect as suggested by the Western Regional Bench in the order of reference reported in 1993 (68) E.L.T., 152. The contention of the assessee is supported by the decision of a larger bench of the Tribunal in joy Form Pvt. Ltd. v. C.C.F., Madars - 1996 (63) ECR 630 (Tribunal), SRB holding that grease proof paper used in machine for manufacture of foam products is an eligible "input" under Rule 57A of the Rules.

18. (i) Felt, Phospher Bronze, stamless steel wire mesh, lm cloth, Dandu cloth etc. Pulp with excess water comes from the pulp making machine to the paper wire mesh. Pulp particles remain on the wire mesh and web of pulp fibre is formed. It moved on moving wire mesh (endless) and is allowed to fall on felt (cotton, woollen or synthetic). The moving felt carries the pulp web to the drier and is calendared or pressed being wound on rolls and treated further. Wet paper is passed between Dandy Rolles covered with Dandy cover so as to smoothen the surface of the paper. These articles are damaged in the process and require replacement periodically. They are replaceable goods used in the paper making machine in the course of manufacture of paper. They can be regarded in a way as parts of the paper making machine or machinery used in the machine or the purpose of the machine; but by their very purpose, they are goods used in relation to the manufacture of paper or paper products and here are "inputs" as contemplated in Rule 57A. In the light of what we have indicated above, the decisions in Collector of Central Excise v. Asham paper Products (P) Ltd.-1990 (50) E.L.T. 12 (Tribunal) ERB, Andhra Pradesh Paper Mills ltd. v. Collector of Central Excise - 1990 (50) E.L.T. 252 (Tribunal) SRB, sirpur Paper Mills Ltd. V. Collector of Central Excise-1991 (56) E.L.T. 424 (Tribunal), WRB, Cominco Binani Zinc Ltd. v. Collector of Central Excise-1990 (48) E.L.T. 283 (Tribunal) SRB, Travancore Cochin Chemicals Ltd. v. Collector of Central Excise - 1990 (50) E.L.T. 172 (Tribunal) SRB, Collector of Central Excise v. Standard Alkali - 1992 (59) E.L.T. 127 (Tribunal), Straw Products Ltd. v. Collector of Central Excise & Paper Mills Ltd. - 1992 (61) E.L.T. 489 (Tribunal) FRB and Collector of Central Excise v. Bihar Caustic and Chemicals Ltd. - 1994 (72) E.L.T. 739 (Tribunal) SRB are correctly decided.

In one of the appeals, the goods stated to be "inputs" is copper wire used is the manufacture of metal containers. The appellant who manufactures metal containers, prints on the metal containers name and the other particulars as per the requirements of the customer.

Then sheets are cut according to required size and the blanks are formed into cylinder and welded. For the process of welding two copper wires are passed between the two weld wheels. A.C. current is generated in the weld wheels as a result of which heat is generated.

The copper wire takes away the excess molten tin at the junction of the two ends of the tin and the headed soft edges of the tin sheets joined are together. The copper wire comes out at the other end with small particles of tin deposits. This copper wire cannot be used again and is disposed of as copper waste. It is stated that the Department has accepted the same as copper waste for the purpose of clearance on duty. The copper wire is not consumed in the course of manufacture. It becomes waste by deposit of particles of tin and has to be replaced. Though it cannot be said that copper wire is used in the manufacture of metal container in the sense that it is raw material which enters into the finished product directly or indirectly, it can safely be said that copper wire is used in relation to manufacture of metal container since without the use of the copper whe, the manufacturing process cannot be conducted.

Copper wire is, therefore, "input" as contemplated in Rule 57A. We have already held that spare of machine, and other goods referred to in exclusion clause (i) are eligible inputs under Rule 57A of the Rules.

It is seen that the earlier decision of the Tribunal in the appellant's own case i.e. 1990 (50) ELT 252 has been specifically overruled in the above judgment. It is also seen from the various decisions relied upon by the appellant that this Tribunal has held that various items like soda ash, caustic soda which are used in cleaning of machinery have been held to be eligible for modvat credit. We find no reason to take a different view with regard to hydrochloric acid and wetnol used by the appellants for the cleaning of machinery in their factory.

3. In view of what has been stated above, the appeal is allowed with consequential relief, if any, to the appellants.


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