CANARA STEEL LIMITED MANIPAL Vs. UNION OF INDIA

JUDGEMENT

(1.) THE short question that falls for consideration in this batch of petitions is whether ramming mass and kalminax sleeves used by the petitioner in the course of manufacture of steel ingots and steel castings, are "inputs" within the meaning of Rule 57-A of the Central Excise Rules. The question arises in the following backdrop.

(2.) THE petitioner company is engaged in the manufacture of steel products and has a factory at Baikampady, Mangalore. In the course of the manufacturing process the petitioner makes use of ramming mass and kalminax sleeves as lining material in the electric arc furnace and as insulating material for maintaining the temperature of the molten metal poured into castings. MODVAT credit for both these items was availed by the petitioner in terms of Rule 57-A of the Central Excise Rules on the premise that the same were "inputs" used in the manufacture of the final product. The Central Excise Authorities were however of the view that the credit availed of by the petitioner, was not legally admissible as the two items mentioned earlier were not "inputs" in the true sense of the said expression. Notices were accordingly issued to the petitioner to show-cause why the credit availed of by it, should not be denied and the excise duty payable recovered. The petitioner opposed the show-cause notices and the proposed recovery, contending that ramming mass and kalminax sleeves were inputs and had been rightly treated to be so while granting credit. The Assistant collector did not however, find favour with the contentions raised by the petitioner and by different orders passed by him, demanded the recovery of the amount said to have been wrongly availed of by the petitioner. Aggrieved, the petitioner went up in appeal to the Collector of Customs and Central Excise (Appeals), bangalore, who relying upon the decision of the Central Excise and Gold Control Appellate Tribunal, South Regional Bench, madras, in the case of Sathya Steel Strips Private Limited v collector of Central Excise and the decision of West Regional bench at Bombay of the said Tribunal in Mukund Iron and Steel works Limited v Collector of Central Excise , held that ramming mass and kalminax sleeves, were not "inputs" and did not qualify for MODVAT credit under the MODVAT scheme. The appeals preferred by the petitioner were accordingly dismissed. It is against the said orders of the Appellate Authority that the petitioner has come up with the present writ petitions, inter alia assailing the constitutional validity of Rule 57-A of the Central excise Rules and in the alternative seeking a declaration to the effect that "ramming Mass and Kalminax Sleeves" are "inputs" within the meaning of the said rule.

(3.) I have heard Mr. Radesh Prabhu, learned Counsel appearing for the petitioner and Mr Mukunda Menon for the respondents. The writ petitions do not spell out any reason muchless a compelling one why Rule 57-A of the Central Excise Rules, could be considered to be ultra vires of the Constitution. All that is stated is that since Rule 57-A excludes substances like ramming mass and kalminax sleeves etc. , from the purview of the expression "inputs", the same makes an unreasonable classification, and that the rule is arbitrary in nature. Apart from the fact that the petitioner has on a true and correct interpretation of the rule, accepted the position that the same excludes substance like ramming mass and kalminax sleeves from the purview of the expression "inputs", it is difficult to see how any such exclusion could by itself make the rule either unreasonable or arbitrary. Rule 57-A, empowers the Central government to specify by a Notification in the Official Gazette, finished excisable goods also referred to as final product, for purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975. Such credit can in terms of the said provision, be claimed on the goods used in or in relation to manufacture of the final products. The credit so allowed towards the payment of excise leviable on the final product whether under the Excise Act or any other Act as the case may be can be claimed subject to the provisions of the rule and the conditions and restrictions that may be specified in the Notification. For the purpose of Rule 57-A the expression "inputs" has been defined by the explanation though not exhaustively to include the following :