LLOYDS METALS AND ENGINEERS LTD. Vs. ACCE

JUDGEMENT

(1.) Modvat credit of Rs. 27,702/ - has been disallowed on (1) cement, (2) Acquat, Formulation, Biosite (Chemical items) and (3) H.S.S. Hand tap on the ground that these are not capital goods under Rule 57Q of the Central Excise Rules. In addition, a penalty of Rs. 5000/ - has been imposed. The period of dispute is May and June, 1996.

(2.) I have heard Shri V.K. Jain, ld. C.A. for the appellants and Shri Uma Shankar, SDR for the Revenue and record my findings herein below:

(3.) Chemical items are used for water treatment that, is, in the water distribution system of the sponge iron plant. From the kiln, sponge iron at the temperature of around 800 degree C. is discharged to the Rotary Cooler where the temperature is brought down by cooling into water as, at that high temperature, sponge iron cannot be exposed to the atmosphere since it will absorb the atmospheric moisture and will lose its magnetic properties. Therefore, although these items may not qualify as capital goods under Rule 57Q, they will qualify as inputs under the provisions of Rule 57A of the Central Excise Rules and are hence eligible to modvat credit.