COMET STEELS LTD. Vs. CCE

JUDGEMENT

(1.) THIS is the party's appeal against the above captioned impugned order No. A/71/95 dated 21.2.1995 of the Collector of Central Excise and Customs (Appeals), Pune, praying for setting aside the same and to allow Modvat credit on duty paid on aluminium oxide grains. The facts of the case are mat the appellant manufactures iron and steel products under Chapter 72, and working under Central Excise control and avails the benefit of Modvat credit under rule 57A of the Central Excise Rules on the inputs H.R. Coil/C.R. Coil and aluminium oxide grains. The appellant has availed Modvat credit of Rs. 11,857/ - on the input aluminium oxide grains during the period from August 1993 to January 1994 as per the RG 23A part II & III entry No. 4318/30.8.1993, 522/30.10.1993, 6698/25.11.1993 and 7279/18.12.1993 which is not available, as the said input is used to rough the surface of the rollers and the rollers are the part of the rolling mill i.e. machine and as such it is not used in or in relation to the manufacture of the final products. Show cause notice was issued on 15.2.1994 by the Superintendent calling upon the appellant to show cause as to why the said amount should not be recovered under rule 57I of the Central Excise Rules read with section 11A of the Central Excise Act. The appellant replied to it on 26.2.1994. After hearing the parties during the personal hearing held on 23.4.1994, the Assistant Collector of Central Excise, Nanded has passed the order -in -original, after hearing the party and considering the written submission on the records dropping the show cause notice. The appeal preferred by the department is allowed by the Collector (Appeals), Pune in the impugned order. Hence this appeal.

(2.) THE learned counsel appearing for the appellant has argued that the input Aluminium oxide grain is blasted on rolls for matte finish on the rollers, which will give to steel strips, which are drawn through it, the rough/ matte surface. The exclusion clause is not attracted though used in the machine. The inputs have also formed part of the final product as it is used on the rolls, and not as a tool. It is a consumable one, and the affidavit filed by one J. Narasimhan explains the functioning, and the appellant is entitled to Modvat credit. In support of this contention : 1992 (62) ELT 129 : 1992 (43) ECR 561 (T) in the case of Allied Electronics & Magnetics Ltd. v. CCE, : 1998 (102) ELT 119 in the case of CCE v. Devidayal Aluminium Ind. (P) Ltd. and : 1998 (101) ELT 398 in the case of CCE v. Usha Rectifier Corporation are relied upon. The learned JDR has submitted that the input is used for manufacturing apparatus and no Modvat is available. Para 2 of the order -in -original is clear in that regard.

(3.) THE affidavit of the Deputy Manager, Excise of the appellant narrates the utility of the inputs in the process of the manufacture of the final product. The input aluminium oxide grains is used for shot blasting on the rollers for obtaining rough surface on it. This is a daily activity. The rough surface and the rollers will give rough surface/matte surface on the steel strips while the steel strips are drawn through the rollers on which the shot blasting was done. For painting on the capital CR/CRCA strips the roughness/matte surface has to be obtained. The strips are to be used only after painting. The CR/CRCA strips cannot be marketed without the rough surface/matte surface on them. In the process the aluminium oxide grains are consumed and the final products are obtained with the rough surface or matte surface, and there is nexus with the process and the ultimate production of the final production. In such a case Modvat credit is available on the input as per the decision in : 1990 (26) ECR 10 (SC). The nexus is so connected with the process, with the ultimate production of the final product. As per the reply of the appellant to the show cause notice the input aluminium oxide grains is used in relation to the manufacture of CRCS coils in their plant. It is a regular consumable item which is used for the direct production/manufacturing process.