1993 (7) TMI 193 - AT - Central Excise

Resins in Sand Moulds: Eligibility for Modvat Credit

COLLECTOR OF CENTRAL EXCISE, CALCUTTA-II Versus HINDUSTAN MOTORS LTD.

The Tribunal referred the issue of whether resins used in sand moulds for iron/steel castings are eligible for Modvat credit to the High Court of ... Modvat credit - Input Issues Involved:1. Whether 'resin' used in the manufacture of sand moulds, which is used in the manufacture of iron/steel casting, is entitled to Modvat benefit.2. Whether the time limit prescribed in Section 11A of the Central Excises and Salt Act, 1944, can be read into Rule 57-I of the Central Excise Rules, prior to 6-10-1988.Issue-wise Detailed Analysis:Issue 1: Modvat Benefit for Resin Used in Sand MouldsThe primary issue is whether resin used in the manufacture of sand moulds, which are subsequently used in the manufacture of iron/steel castings, is eligible for Modvat credit. The respondents, M/s. Hindustan Motors, argued that sand moulds are not goods as they are not marketable, cannot be stored or transported, and are formed only for the duration of the casting process. They cited Supreme Court decisions in Ambalal Sarabhai Enterprises v. Collector of Central Excise and Bhor Industries v. Collector of Central Excise to support their claim that sand moulds do not satisfy the criterion of marketability and hence cannot be considered goods. Consequently, the resins used in the preparation of these sand moulds should be treated as used in the manufacture of castings, making them eligible for Modvat credit.The Tribunal accepted these contentions, holding that the use of resins in the preparation of sand moulds is not a separate manufacturing process but part of the ultimate process of manufacturing castings. This finding was challenged by the Collector, who argued that the manufacture of sand moulds and steel castings are two distinct processes and that resin is used only in the manufacture of sand moulds, not in the manufacture of metal castings. The Collector contended that resins should be considered inputs for sand moulds only and not for iron/steel castings.The Tribunal, however, rejected this argument, reaffirming that sand moulds are not goods due to their non-marketability. The Tribunal concluded that the resins are used in relation to the manufacture of the final product (castings) and thus are eligible for Modvat credit. The Tribunal referred the following question to the High Court of Calcutta: 'Whether resins used in the preparation of sand moulds which are used in the manufacture of iron/steel casting are entitled to modvat credit and whether such resins can be treated as inputs in or in relation to the manufacture of final products 'casting' for grant of such benefitRs.'Issue 2: Applicability of Time Limit under Section 11A to Rule 57-IThe second issue concerns whether the time limit prescribed in Section 11A of the Central Excises and Salt Act, 1944, applies to Rule 57-I of the Central Excise Rules before its amendment on 6-10-1988. The Tribunal had found that the demand notices were barred by limitation. The Collector relied on the Gujarat High Court's judgment in the Torrent Laboratories case, which was contrary to the decisions of the Karnataka and Madras High Courts. The Karnataka High Court, in Tungabadhra Steel Products v. Superintendent of Central Excise, and the Madras High Court, in Advani Oerlikon Ltd. v. Assistant Collector of Central Excise, held that the time limit under Section 11A would be applicable even if the other provision under which such recovery is made does not contain any time limit stipulation.The Tribunal noted that this issue becomes academic because the Tribunal had already held on merits that the respondents are eligible for Modvat credit. The finding on time bar would only be material if it had been held that they are not entitled to the said benefit. Therefore, the Tribunal did not refer this question to the High Court.Conclusion:The Tribunal decided to refer the first issue regarding the eligibility of resins used in sand moulds for Modvat credit to the High Court of Calcutta. The second issue regarding the applicability of the time limit under Section 11A was deemed academic and not referred.