2005 (10) TMI 147

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....hey availed Modvat credit on the inputs oxygen and nitrogen fraudulently during the period from 1-11-1998 to 7-8-1999. The brief facts are that the plant was shut down due to technical problems. Normally, oxygen and nitrogen are used as inputs in the manufacture of pig iron in the Corex furnace. Even when the plant was shut down, the appellants were receiving oxygen and nitrogen through pipeline from M/s. Jindal Praxair Oxygen Company Limited, the manufacturer of the said inputs and availed Modvat credit on the same. The contention of the appellants was that some hot metal got solidified and stuck in the Corex furnace and it was a technological necessity that the same had to be removed before restarting the furnace. For that purpose, oxygen....

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....tant product was pig iron. (iv)    The Commissioner's finding in para 9 of the impugned order that oxygen and nitrogen were not used in or in relation to the manufacture of the final product is not correct on facts. (v)     Where any process is integrally connect with the ultimate production of goods that process falls within the express "in the manufacture of goods", has held by the Apex Court in the case of J. K. Cotton Spg & Wvg Mills Co. Ltd. reported in 1997 (91) E.L.T. 34 (SC). (vi)    In the case of Ellora Steels Ltd. v. CCE reported in 1995 (78) E.L.T. 294 (T), the oxygen gas used in electric furnace is a direct input used in the manufacture of steel castings. (vii) ....

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....bsp;  In the absence of mens rea, imposition of penalty of Rs. 5,00,000/- is totally unwarranted. 4. The learned SDR reiterated the contentions in the Order-in-Original. 5. We have gone through the records of case carefully. The short point is whether oxygen and nitrogen used by the appellants for reactivating the Corex furnace is entitted for Modvat credit. Revenue is not inclined to allow Modvat on the ground that the inputs were used during the shut down period and there was no manufacture. It has also been held that the inputs were not used in relation to manufacture of final products. The fact that solidified material clogged the furnace is not in dispute. The appellants used oxygen and nitrogen for removing the solidified m....