1993 (6) TMI 148 - AT - Central Excise

Tribunal affirms MODVAT credit eligibility based on manufacturing process contribution. High Court reference dismissed.

The Tribunal affirmed the eligibility of items for MODVAT credit, determining their direct or indirect contribution to the manufacturing process. The ... Reference to High Court in Modvat cases Issues:1. Interpretation of Section 35G(1) of the Central Excises and Salt Act, 1944 for seeking reference to the High Court.2. Eligibility of MODVAT credit for certain items used in manufacturing carburetters.Analysis:1. The Collector of Central Excise sought reference to the High Court under Section 35G(1) based on an issue of law arising from an order of the Tribunal. The issue was whether certain items used in manufacturing carburetters were eligible for MODVAT credit. The Tribunal had initially denied credit for items like Dycote, Degasser, Dresswell, Aluminate, Aerosal Spray, Trichloroethylene, and Metaflux-Zincflux, claiming they were not directly related to the final product.2. Upon appeal, the Tribunal examined the use of each item and concluded that most of them were indeed used in or in relation to the manufacturing process. For example, Dycote, Dresswell, Aerosal Spray, and Aluminate were essential for shaping the final product as per design, while Metaflux-Zincflux and Degasser played crucial roles in the production process. Trichloroethylene was used for degreasing carburetters, directly impacting the final product's quality.3. The question raised for reference to the High Court was whether chemicals used for die maintenance or as release agents could be considered inputs under Rule 57A. The appellant argued for the reference, citing a Supreme Court case, while the respondent contended that the Tribunal's detailed analysis already established the items' relevance to the final product.4. Section 35G allows references to the High Court on issues of law, not facts. The Tribunal found that the items in question were indeed used in or in relation to the manufacturing process, making them eligible for MODVAT credit. The Tribunal's decision on factual findings is final and not subject to appeal through a reference.5. Previous legal precedents cited by both parties were deemed inapplicable to the current case, emphasizing the need for individual examination of each case for MODVAT credit eligibility based on the nature of use. The Tribunal concluded that no issue of law arose from its order, rejecting the application for reference to the High Court.6. In summary, the Tribunal's decision stood, affirming the eligibility of the items for MODVAT credit based on their direct or indirect contribution to the manufacturing process. The application for reference to the High Court was dismissed, emphasizing the importance of factual analysis in determining eligibility for credit under Rule 57A.