1994 (3) TMI 237 - AT - Central Excise

Appellate Tribunal: Modvat credit restored for Mafron/Freon Gas

The Appellate Tribunal CEGAT, Bombay allowed the appeal, directing the restoration of Modvat credit for Mafron/Freon Gas. The Tribunal determined that the ... Modvat Credit permissible Issues:- Appeal against rejection of Modvat credit for Mafron/Freon Gas used in manufacturing rubber processing chemicals.- Interpretation of Rule 57A of the Central Excise Rules regarding eligibility of Modvat credit.- Determination of whether Mafron/Freon Gas qualifies as an input used in relation to the manufacture of the final product.Analysis:The appeal before the Appellate Tribunal CEGAT, Bombay involved the rejection of Modvat credit for Mafron/Freon Gas by the department, contending that these gases were meant for use in machinery as refrigerant gases and thus not eligible for credit under Rule 57A of the Central Excise Rules. The appellants, manufacturers of rubber processing chemicals, argued that the gases were essential for chilling monoethylene glycol to the required temperature for the manufacturing process. The technical expert's report highlighted the critical role of these gases in maintaining the necessary temperature for the reaction to occur and the final product's quality to be achieved.During the proceedings, the department's representative asserted that Mafron/Freon Gas were solely refrigerant gases used in the machinery's refrigerating system and not directly related to the manufacturing process. However, after considering both parties' arguments, the Tribunal found that the gases were indispensable for chilling the glycol to enable the proper chemical reaction and crystallization, essential for the final product's quality. The Tribunal emphasized that the gases were not part of the machinery but consumable items directly involved in the manufacturing process. Drawing parallels with previous judgments involving gases like acetylene and nitrogen, the Tribunal concluded that Mafron/Freon Gas qualified for Modvat credit as they were integral to the manufacturing process and not merely for machinery maintenance.Ultimately, the Tribunal allowed the appeal, directing the authorities to restore the Modvat credit for Mafron/Freon Gas as they were deemed inputs used in relation to the manufacture of the final product. The decision highlighted the importance of considering the direct impact of inputs on the manufacturing process rather than their classification as machinery components, setting a precedent for similar cases involving essential consumables in manufacturing processes.