Decided on December 08,2000



S.L.PEERAN - (1.)THESE appeals of the party and the Revenue arise from a common Order -in -Appeal No. 155 to 158/98 (CBE) dated 30.1.1998 passed by the Commissioner (Appeals) by which he has granted the benefit of modvat credit on few items and has denied in respect of few others.
(2.)Therefore, both the party and the Revenue being aggrieved with the impugned order have filed respective appeals challenging the correctness of the order. By this common order, the Commissioner had disposed of 4 Orders -in -Original and the credit disallowed by the same is noted below: - -
The facts of the case are that the assessees are manufacturing Aluminium and articles thereof falling under chapter 76 of the schedule to the Central Excise Tariff Act. They are also availing the credit of duty on various inputs under Rule 57A of the Central Excise Rules, 1944. They had also availed the said credit in respect of 40 inputs. However, the lower authorities held that these did not fall within the definition of 'inputs' in terms of rule 57A as the same were not used in relation to the manufacture of final products. Hence, they prepared appeal before the Commissioner (Appeals), who on consideration upheld the assessee's contention in so far as the following items are concerned by giving his finding on the nature of use of the items against which Revenue has also come in appeal contending that they are not items used in the process of manufacture of final product and modvat credit is required to be denied: - - (1) Hydrochloric Acid (HCL): - -

The Commissioner (Appeals) has held that it is used for neutralization of Red Mud Slurry in order to keep the pH value within allowable level fixed by Pollution Control Board. The pollution control activity is very much related to the manufacturing process and hence held that credit of duty is admissible on HCL under rule 57A.

(2) Calcined Petroleum cake

(3) Coal Tar Pitch (4 Coal pitch

(5) Hard pitch

(6) Granulated pitch

The Commissioner has noted that the Coal carbon paste made from the above items is used as anode in the electrolytic cell where electrolysis of alumina takes place. He has also noted that this carbon paste is different from the carbon electrode paste used for bonding the carbon blocks. He has noted that above item Nos. 2 to 6 are absolutely necessary for electrolysis to take place and without which aluminium metal cannot be produced. He, therefore, held that they are essential inputs for manufacture of aluminium under Rule 57A.

(7) Silicon Metal

(8) Manganese

(9) Copper scrap

The above three items (7 to 9) have been held to be used as alloying metals and are added to Aluminium by the Commissioner (Appeals). He has held that they are inputs covered under rule 57A.

(10) Non -ferric Alum

The Commissioner (Appeals) has held this item to be used to recover cryolite which is one of the inputs used for the manufacture of aluminium and hence they are held to be eligible for the benefit.

(3.)IN so far as the above 10 items are concerned, Revenue contend that the credit involved in the above items is to the extent of Rs. 40,02,383.30.
3.1. With regard to Hydrochloric Acid, Revenue's contention is that this is used for neutralization of red mud slurry which is an effluent, in order to keep the pH value within the level fixed by the Pollution Control Board. The observation of the Commissioner that this activity is very much related to the manufacturing process is stated as erroneous. It is contended that an item in order to be covered by the Rule 57A should satisfy the condition of the rule in as much as that the inputs used in or in relation to the manufacture of final product only are considered as inputs and become eligible for credit. It is stated that the acid is used only to treat the effluent which is a wastage obtained and hence in no way connected with the manufacturing process. They contend that only in the case of capital goods the pollution equipments were eligible for credit that too with effect from 23.7.1996 by virtue of the substitution of the explanation to Rule 57Q. In this regard, Revenue relies on the ratio of Tribunal decision in Gujarat Alkalies and Chemicals Ltd. reported in, 1996 (81) ELT 117 (T) :, 1995 (61) ECR 586 (T) wherein acid used in an effluent treatment plant to destroy the traces of sodium cyanide in the effluent before discharging it, has been denied the benefit.

3.2. Party's contention is that besides the above function noted, it is also used for de -mineralising boiler feed water to avoid scales formation and corrosion in process pipelines. The assessee contends that the judgment relied by Revenue is not applicable and distinguishable as the present case was on a different footing. They also rely on this Bench decision rendered in the case of Madras Aluminium Co. Ltd. by final order No. 1683/99 dated 7.7.1999 rendered by the then Late Member (T) Shri V.K. Ashtana. It is stated that this ratio of this judgment is identical to the facts of this case and would apply in toto. Besides this decision they are relying on the judgment of the Northern Region Bench rendered in High -Tech Carbon v. CCE, Allahabad - : 1996 (88) ELT 123.

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