1993 (9) TMI 206 - AT - Central Excise

Tribunal grants modvat credit for essential inputs in manufacturing process

WHEELS INDIA LTD. Versus COLLECTOR OF CENTRAL EXCISE, MADRAS

The tribunal ruled in favor of M/s. Wheels India Ltd., allowing modvat credit for chemicals used for cleaning and degreasing, as well as carbon-di-oxide, ... Modvat credit Issues:- Appeal against denial of modvat credit for cutting oil, carbon-di-oxide, and chemicals used for cleaning and degreasing.- Whether chemicals used for cleaning and degreasing are essential for the production of the final product.- Whether carbon-di-oxide is an eligible input for modvat credit in the welding process.Analysis:Appeal No. E/383/90/MAS:The appeal was filed by M/s. Wheels India Ltd. against the denial of modvat credit for chemicals used for cleaning and degreasing, as well as carbon-di-oxide. The lower appellate authority allowed modvat credit for cutting oil but upheld the denial for other items. The advocate for the appellants argued that cleaning and degreasing chemicals are essential for various manufacturing stages and presented technical literature supporting the necessity of carbon-di-oxide in welding. The Department contended that carbon-di-oxide is not a process material. The tribunal observed that cleaning and degreasing are crucial before subsequent operations like electroplating, and phosphating, and modvat credit should be allowed for inputs used in or in relation to manufacturing. The technical necessity of carbon-di-oxide in welding for ensuring quality and safety was acknowledged. The tribunal held that the denial of modvat credit for these items was not legally sustainable and allowed the appeal.Appeal No. E/380/90/MAS:Since the appeal of M/s. Wheels India Ltd. was allowed, granting modvat credit for cleaning and degreasing chemicals and carbon-di-oxide, the Revenue's appeal against the same denial was dismissed as a consequential outcome of the decision in the first appeal.In conclusion, the tribunal ruled in favor of M/s. Wheels India Ltd., allowing the modvat credit for chemicals used for cleaning and degreasing, as well as carbon-di-oxide, as these inputs were deemed essential for the manufacturing process and the final product. The judgment emphasized the importance of establishing the necessity and relevance of inputs in the manufacturing process to qualify for modvat credit, ultimately setting aside the lower authorities' orders and granting relief to the appellants.