Arun Kumar, J. - (1.) 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 MODVAT 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 57A of the Central Excise Rules."
(2.) In order to appreciate the controversy, the relevant facts are that the assessees claimed benefit of MODVAT 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 items the end product cannot be produced. The assessee in these cases are engaged in the manufacture of items of steel like pistons in the Escorts case. The manufacture takes place in electric arc furnace refractories. It is submitted on behalf of the assesses that 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 are processes in which chemicals are used to line the furnaces to neutralise the effect of acidic vapours produced during the course of melting steel. Unless these chemicals are used, the furnace may burst. Accordingly, it is submitted on behalf of the assessees that these chemicals being necessary inputs in the process of manufacture of steel items, MODVAT Credit has to be allowed on them.
(3.) In respect of this contention that it is necessary to use such processes like Ramming Mass, the learned counsel appearing for the assessee drew our attention to a book titled as "Electric Furnace Steel Making (American Institute of Mining)" wherein while dealing with electric arc furnace refractories, it is stated on page 157 as under : "It is well known 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 sulphur 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 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 phosphorus in the melt and not with the silica from the refractories - a more acidic material than phosphorus or sulfur. Accordingly, a basic refractory-lined container (of dolomite or magnesite) is provided to allow the removal of the undesirable phosphorus and sulfur from the melt to the slag without excessive corrosion of the refractory lining." ;