TaxTMI 
TaxTMI 
2000 (7) TMI 112
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....td. v. CCE [1993 (67) E.L.T. 377], another 2-Member Bench (WRB) held that Liquid Nitrogen used for creating chilling and inert atmosphere for chemical reaction in the reactor vessel was eligible for the inputs-credit under Rule 57A. In Eastern Naphtha-Chem Ltd. v. CCE [1994 (72) E.L.T. 190], another 2-Member Bench (ERB) held that 'hot thermex' used in the manufacturing process to maintain the required temperature for chemical reaction was eligible for the inputs-credit. The referring Bench found a conflict between the ratio of the decision of SRB in Mysore Petrochemicals Ltd. (supra) and that of the decisions of WRB and ERB in the cases of Kopran Ltd. (supra) and Eastern Naphtha-Chem Ltd. (supra). The referring Bench, presumably, found HT Oil to be comparable with the inputs in question in the aforesaid three cases. The Bench, therefore, wanted the conflict to be settled by a Larger Bench. Hence the matter before us. 3.The appellants in the instant case were engaged in the manufacture of goods falling under Chapter sub-headings 3817.00 and 3823.00 of the Central Excise Tariff Act. They were availing of the facility of Modvat credit on inputs under Rule 57A. The Modvat credit of ....
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....dum of appeal in some detail. HT Oil is used as heating medium for the process of manufacture of the final product viz. LAB. The main raw materials for manufacture of LAB are Kerosene and Benzene. The manufacturing plant consists of two parts viz. Paraffin Extraction Unit and Lab Production Unit. In the former unit, paraffin is extracted from kerosene in three steps viz. Prefractionation, Hydrotreatment and Molecular Extraction (Molex). The heart-cut of Kerosene resulting from fractional distillation in the Prefractionator contains Paraffin and the same is sent to Hydrotreater wherein impurities are removed. The heart-cut is then taken to the Molex unit , where the Paraffin is extracted by Molecular Sieves. Enormous amount of heat has to be provided for the process in all the three steps of paraffin extraction and this is achieved by using HT oil. 5.The Lab Production Unit has two sections viz. Pacol unit and Detergent Alkylation unit. In the former unit, Paraffin is converted to Olefins and, in the latter, these Olefins are treated with Benzene to get LAB. The LAB is separated from unconverted Benzene and Paraffin and the by-products resulting from side-reactions. This separati....
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....cs Ltd. v. CCE [1997 (92) E.L.T. 150]. (x) Kopran Ltd. v. CCE [1993 (67) E.L.T. 377]. (xi) Eastern Naphtha-Chem Ltd. v. CCE [1994 (72) E.L.T. 190]. 10. Referring to the Tribunal's decision in the case of Mysore Petrochemicals Ltd. v. CCE [1993 (64) E.L.T. 484], ld. Advocate has argued that the said decision is not a binding precedent inasmuch as it had not followed the law laid down by the Hon'ble Supreme Court in the case of Collector v. Ballarpur Industries Ltd. [1989 (43) E.L.T. 804 (S.C.)]. He has also made submissions on the amplitude of the expression "in or in relation to the manufacture" by drawing support from the decisions of this Tribunal (Larger Bench) in the cases of Shri Ramakrishna Steel Industries Ltd. v. CCE [1996 (82) E.L.T. 575] and Union Carbide India Ltd v. CCE [1996 (86) E.L.T. 613]. 11.Ld. Departmental Representative has, on the other hand, submitted that HT oil was used only for making the manufacturing apparatus functional and that it did not react with Kerosene or any other raw material. According to him, the oil was a part of the manufacturing apparatus and was, ipso....
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.... it cannot be used as a fuel, which fact would go to dislodge ld. DR's contention that HT Oil was used as a fuel and hence stood excluded from the category of inputs under Rule 57A. 14.The appellants have explained, in their appeal memo, the use of HT Oil in the process of manufacture of LAB. They have also given a diagramatic sketch showing the sites of such use in their plant vide para (8) above. We note that the use of the oil as explained with the aid of diagram has not been disputed by the respondents. The HT Oil, pre-heated to a temperature of 329°C, is circulated in the plant for supply of heat to various stages of the process of manufacture of LAB. The entire process can be considered to have two phases namely (a) extraction of Paraffin from Kerosene (raw material) and (b) production of LAB from Paraffin. The extraction of Paraffin is done in three steps which take place in Prefractionator, Hydrotreater and Molex unit. The heat required in all these three steps is provided by the circulating HT oil. The production of LAB from Paraffin takes place in three steps. In the first step, Paraffin is converted to Olefins in a reactor in the 'Pacol unit'. In the next step, the O....
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....e lubricants were used "in or in relation to the manufacture of final products" and therefore qualified to be inputs under Rule 57A. It is significant to note that, in the case of Modi Rubber Ltd (supra), the lubricants which were used in the manufacturing apparatus, had no direct role in the chemical processes carried out in the apparatus. The HT Oil in the present case is also used in the manufacturing apparatus. While, in the case of Modi Rubber Ltd. (supra), the lubricants had no direct role to play in the actual process of manufacture of final product, the HT Oil in the instant case certainly has a direct role in the actual process of manufacture of LAB inasmuch as it provides the heat required for the chemical/physical processes taking place in the various units of the plant. As we have already noted, the process of manufacture is impossible without such heat transfer. Therefore, if the lubricants in the case of Modi Rubber Ltd. (supra) could be held to have been used "in or in relation to the manufacture" of final product within the meaning of this expression in Rule 57A, the HT Oil in the instant case must, a fortiori, be held to be so. We would, therefore, follow the ratio....
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....held that, even if it be assumed that the material formed part of the manufacturing plant, it did not fall under the exclusion clause. The 2-Member Bench in Eastern Naphtha-Chem Ltd. (supra) rendered its decision after considering various judgments of the Supreme Court and a decision of the Calcutta High Court. The Bench also agreed with the ratio of the decision of a co-ordinate Bench in Kopran Ltd. (supra). We have also noted that almost all the decisions of the Supreme Court and the Calcutta High Court relied on by the 2-Member Bench in Eastern Naphtha-Chem Ltd. (supra) were, later on, considered by the Larger Bench in Union Carbide India Ltd. (supra), the ratio of which we have followed in the present case. We are in full agreement with the ratio of the decisions rendered by the 2-Member Bench of the Tribunal in the cases of Kopran Ltd. (supra) and Eastern Naphtha-Chem Ltd. (supra). 19.On the other hand, we must disagree with the view taken by the 2-Member Bench in the case of Mysore Petrochemicals Ltd. (supra). In that case, the material in question was "Salt Melt' which was used by the appellants for removing the heat generated by the exothermic reaction adopted for produc....