Advocates Appeared:
S.K. Bagaria, J.P. Khaitan,A. Choudhuri

ORDER

K. Sankararaman, Member (T)

1. These two appeals filed respectively by M/s. Hindustan Motors Ltd. and Collector of Central Excise, Calcutta-II, arise from the same order-in-appeal No. 20/Cal-II/90 dated 29-1-1990 passed by the Collector of Central Excise (Appeals), Calcutta, in terms of which the first-mentioned appellants were held to be not eligible for Modvat Credit in Respect of Resins used by them in the manufacture of Sand Moulds, in turn used for producing castings for parts and accessories of motor vehicles. The finding to the above effect was originally that of the Assistant Collector of Central Excise, Rishra which, on appeal by them, was upheld by the Collector (Appeals) in his impugned order. He, however, held that the demand beyond the time-limit of six months was not enforceable. The decision on merits has been challenged by the Company while that on limitation by the Collector, Calcutta-II.

2. S/Shri S.K. Bagaria and J.P. Khaitan, learned Advocates, appeared for the appellants. Shri Bagaria started his argument with the submission that for availing Modvat benefit three conditions are to be satisfied. The first is that both the inputs and the final products should be covered by the relevant Notification namely Notification No. 177/86, dated 1-3-1986. The second is that the inputs should be used in or in relation to the manufacture of the final product. The third is that the inputs should not be covered by the excluded category of inputs mentioned in the Explanation under Rule 57A. He, then, explained the manner of use of the material in question. The inputs in the present case are Resins and the final products are castings. The Resins are used for the preparation of Sand Moulds which is in relation to the manufacture of castings. Sand Moulds are not goods but they constitute a stage in the process of manufacture of castings. Sand, as such, cannot be used for the purpose of casting as it does not have any binding or cohesive property. To give it the necessary binding property for preparing the mould which will have a purely temporary existence inside the mould-box for the duration of the casting process, it has got to be mixed with the Resins. Sand is then temporarily held in shape by the Resin. This shaped Sand is, for the sake of convenience, referred to as Sand Mould. It is not really a mould as normally understood and is incapable of being stored or moved, not to speak of being marketed. The castings are made by pouring the molten metal into a mould-box containing the shaped sand. The molten metal then occupies the gaps in the mould-box left by the shaped sand. After cooling, the metal takes the required shape and is removed from the mould-box by knocking off the sand. The Resins are thus used in shaping the sand which is used in the process of manufacture of the final product, casting.

3. Shri Bagaria, then, explained how the use of Resins, in the preparation of the shaped sand, constitutes use in relation to the manufacture of castings is in conformity with the three requirements referred to by him at the outset. Firstly, the Resins and the final products figure in the Notification No. 177/86 and thus satisfy the first criterion indicated by him. There is no dispute about this position. As regards the second, namely use of Resins in or in relation to the manufacture of castings, he submitted that there is no serious dispute about this. He referred to the decision of the Supreme Court in Collector of Central Excise v. East End Paper Products reported in MANU/SC/0107/1989 : 1989 (43) E.L.T. 201 wherein they had observed that anything that enters into and forms part of the process of manufacture must be deemed to be raw material or component part of the end-product and must be deemed to have been used in completion of manufacture of the end-product. The present case of Modvat is on a better footing in view of the use of the enlarged expression, "used in or in relation to the manufacture" unlike the other expression, "used as raw material or component part in the manufacture of the final product". This has got the widest possible amplitude. That is why the exclusion has been provided for in the Explanation under Rule 57A where it was intended not to extend the benefit. As regards the third criterion, the undisputed position is that Resins which are their inputs are not any of the excluded items viz. machines, plant etc.

4. Shri Bagaria, then, submitted that the crucial question is whether the Resins are used in the manufacture of final products, "Castings" or they are used in the manufacture of any intermediate products. He clarified that they are not claiming Modvat Credit in respect of any material called Sand Mould. They are claiming the benefit only for Resins which are used in relation to the final product, "Castings". Their input material for which they have claimed Modvat Credit is Resin. It is not an excluded type of input. If the input itself is not machine, machinery etc. which alone are the excluded items, then the exclusion clause cannot be invoked. He referred to the following decisions :-

(i) MANU/CK/0025/1989 : 1990 (47) E.L.T. 376 - Collector of Central Excise v. Hindustan Development Corporation ;

(ii) MANU/CC/0036/1990 : 1990 (48) E.L.T. 283 - Cominco Binani Zinc Ltd. v. Collector of Central Excise ;

(iii) MANU/CM/0024/1989 : 1990 (48) E.L.T. 552 - Mukand Iron & Steel Works Ltd. v. Collector of Central Excise ;

(iv) MANU/CC/0032/1991 : 1991 (56) E.L.T. 578 - Collector of Central Excise v. Bimetal Bearings Limited ;

(v) MANU/CM/0074/1990 : 1990 (49) E.L.T. 538 - Collector of Central Excise v. Weldekar Laminates (P) Ltd. ;

(vi) MANU/CK/0032/1991 : 1991 (56) E.L.T. 790 - Collector of Central Excise v. Avery India Ltd.

5. He, then, referred to the unreported decision of this Bench in Collector of Central Excise v. Emami Paper Mills in Order No. A/719/Cal/91 dated 31-10-1991 since reported in 1992 (61) E.L.T. 480 (Tri.) wherein it had, inter alia, been held that certain items like wire mesh, industrial cloth used in the manufacture of paper, are eligible for Modvat Credit as they are not hit by the exclusion in Rule 57A even if they are treated as machine parts, as machine parts are not specifically excluded in the said provision. A similar decision in Straw Products Limited v. Collector of Central Excise has recently been reported in 1992 (19) ETR 545 . The North Regional Bench of the Tribunal has held in Steriware Pvt. Ltd. reported in 1992 (19) ETR 774 that Silicone Spray used for facilitating detachment of components from moulds during production of plastic moulded components in injection moulding machines is an eligible input. Silicone Spray, a chemical, was not treated as appliance or equipment.

6. After referring to the above-mentioned decisions in support of his stand that the Resins which are used by them as inputs are not themselves of the excluded type as per the Explanation in Rule 57A and, as such, entitled to Modvat benefit, Shri Bagaria referred to the findings of the authorities below. The Collector (Appeals) had held that the input, Resin, is nothing but prepared binder used in Sand Moulds and cores used for making moulds and that Modvat Credit is not admissible if used in exempted moulds. The Assistant Collector, whose order had been upheld by the Collector (Appeals) on merits, had held that though the Sand Moulds have only a one-time use, these are, nevertheless, equipment/apparatus/appliances by means of which the castings are given their shapes and that, by virtue of the Explanation to Rule 57A, the credit taken on Resin is inadmissible. In this connection, Shri Bagaria submitted that by using the Resins there is no manufacture of any excisable goods at an intermediate stage before the manufacture of castings. There is also no manufacture of any item that is machinery item etc. The Sand Moulds held by the Department to be a manufactured product for which the Resins are used admittedly have short life being unstable and capable of one-time use only. They are not storable/transportable/marketable. He relied upon the decisions of the Supreme Court in Bhor Industries Ltd. v. Collector of Central Excise, Bombay reported in 1989 (40) E.L.T. 280 (SC) and another in Collector of Central Excise v. Ambalal Sarabhai Enterprises, reported in MANU/SC/0012/1990 : 1989 (43) E.L.T. 214 . The marketability criterion for deciding whether the goods are excisable was stressed in these judgments. Applying this test the Sand Moulds are not excisable goods. Tariff Heading 8480.00 covers moulding boxes, moulding patterns, moulds for metals etc. Only marketable moulds are covered under this heading. Such moulds are marketed and are being regularly bought. They find repeated use. The exemption granted to Sand Moulds vide Notification No. 381/86, dated 29-7-1986 does not make Sand Moulds an excisable commodity. Excisability is not determined by exemption notifications. He relied upon the following decisions in this regard :-

(i) MANU/CE/0144/1983 : 1983 (13) E.L.T 1216 - International Conveyors Ltd. v. Collector of Central Excise, Aurangabad ;

(ii) MANU/CE/0119/1983 : 1983 (13) E.L.T. 1123 - Golden Paper Udyog v. Collector of C. Excise ;

(iii) MANU/CE/0246/1985 : 1986 (24) E.L.T. 98 - Lal Woollen and Silk Mills v. Collector of Central Excise .

In the first case, it was held by the Tribunal that if a product is not excisable under any Tariff item, a notification cannot have the effect of making such product as excisable. In the second one, the Tribunal held that where, in fact, there is no levy, an exemption from levy is meaningless. Nor can a levy be inferred from an exemption from such levy when, in fact, there was none. Likewise, the third decision contained a ruling that an exemption notification is not conclusive for determining excisability of an item.

7. Shri Bagaria, then, turned to certain decisions of the Tribunal on this very question which is for decision in the present appeal, namely admissibility of Modvat Credit on Resins used in the preparation of Sand Moulds used in the manufacture of castings. There are certain decisions which are earlier in point of time which are against his line of argument but certain later decisions support his claim. The adverse decisions are as follows :-

(i) MANU/CM/0024/1989 : 1990 (48) E.L.T. 552 (Tribunal: West Regional Bench) - Mukand Iron & Steel Works v. Collector of Central Excise ;

(ii) MANU/CM/0004/1990 : 1990 (50) E.L.T. 50 (Tribunal : West Regional Bench) - Shivaji Works Ltd. v. Collector of Central Excise ;

(iii) MANU/CC/0005/1990 : 1990 (50) E.L.T. 175 (Tribunal : South Regional Bench) - Mysore Kirloskar Ltd. v. Collector of Central Excise .

The learned Counsel contended that these decisions were not correct and had not considered all the issues involved. Thus, in the first case, namely Mukand Iron &f Steel Works, the Tribunal mainly went by the assumption that Tariff recognises Sand Mould as equipment. This is not correct. The Tariff does not lay down any such position. They also went by the fact that there was an exemption notification for Sand Mould. They did not take into account the fact that exemption cannot make it excisable and exemption notification cannot decide the question of excisability. As regards the second case viz. Shivaji Works, it was not correct to hold that it is immaterial whether Sand Moulds are stable or marketable or whether they could be construed as finished excisable goods. They had not gone into the question whether the Resins themselves are in the excluded category of Modvat inputs. Actually, the question, whether Sand Moulds are excisable goods is a very material one for deciding the matter and the Tribunal fell in error in holding otherwise. Shri Bagaria contended that in their manufacturing process no equipment is produced and Rasins are used in relation to the manufacture of castings and not any other product. The Sand Moulds are not similar to identifiable products capable of being marketed which are in fact, marketed like the mould-boxes, dies etc. Steel is used for making them. Then they are used for manufacture of excisable products as equipment, tools etc. The Department will be justified in denying Modvat benefit for goods used in the manufacture of such tools etc. because they are distinct and identifiable goods which satisfy the criterion of goods on account of marketability. Such is not the case with Resins used for preparation of Sand Moulds which are not excisable goods. In the Shivaji Works case, the allegation that Sand Moulds are in the nature of equipment and foundry chemicals are used as inputs of Sand Moulds and not as inputs for castings had not been effectively met or rebutted by the Counsel for the appellants as observed by the Tribunal. But Shri Bagaria contended that they are contesting this two-fold stand of the Department namely - (a) an equipment is manufactured which is capable of being classified as excisable goods and (b) that equipment is exempt from duty. Further in the Shivaji Works case, the Tribunal had held that even if the argument of the Counsel for the appellants was accepted that Sand Moulds are unstable and not marketable, all the same they remain only in the nature of equipment or apparatus and hence come under the purview of Explanation to Rule 57A. Shri Bagaria pointed out that the Tribunal has held that the goods are in the nature of equipment or apparatus. This is not the same as their being equipment/apparatus as such. For these reasons, the decision of the Tribunal in the above-mentioned case is not correct. They had not considered the test of marketability for identifying an item as excisable as laid down by the Supreme Court in Bhor Industries and Ambalal Sambhai Enterprises cases. For the same reason, the decision of the South Regional Bench of the Tribunal can also not be said to have laid down the correct law. The above-mentioned two decisions of the Supreme Court were not cited before them and hence not considered by them. The argument taken by him in the present case that Sand Moulds are unstable and are not goods was not pleaded before them and not considered. Though it was pleaded that Sand Moulds are used only once, there was no pleading, as stated above, that they are unstable and not marketable. The emphasis was that they were intermediate goods and hence, notwithstanding their being fully exempt from duty, they would get covered by Rule 57D and hence Modvat Credit on Resins would be available for the payment of duty on castings. This plea was rejected by the Tribunal. They also went by their decision in Andhra Pradesh Paper Mills v. Collector of Central Excise, Guntur , wherein they had decided that inputs going into the machinery, equipment, tools etc. would not be eligible for the benefit of Modvat Credit and held that inputs used in the manufacture of Sand Moulds which are by themselves in the nature of tools or apparatus have to be treated as used in the manufacture of Sand Moulds and not in or in relation to the manufacture of the castings. Shri Bagaria pointed out that the decision in the Andhra Pradesh Paper Mills case cited above had been departed from by this Bench in two decisions recently - (i) Collector of Central Excise v. Emami Paper Mills in Order No. A-719/Cal/91, dated 31-10-1991 (unreported) [since reported in 1992 (61) E.L.T. 480 (Tri.)] and (ii) Collector of Central Excise v. Straiu Products and Straw Products v. Collector of Central Excise, reported in 1992 (19) ETR 545 . Two decisions of the Special Bench of the Tribunal and of the North Regional Bench were cited by Shri Bagaria in support of the contentions raised by him. These decisions are as follows :-

(i) 1992 (38) ECR 361: NRB - Collector of Central Excise v. Leader Engineering Works ;

(ii) MANU/CE/0095/1991 : 1991 (55) E.L.T. 248 - Hindustan Saintaruware & Industries v. Collector of Central Excise .

The former was in respect of Resins/Chemicals used in the preparation of Sand Moulds in the course of manufacture of castings. He also cited the decision in Collector of Central Excise v. Calcutta Steel Industries, reported in MANU/SC/0078/1988 : 1989 (39) E.L.T. 175 for his contention that it is for the Department to prove that goods are excisable. He relied upon the following decisions in support of his contention that simply because somethings may perform some functions in the process of manufacture they would not become apparatus, equipment, machine tools etc. and therefore, ineligible for Modvat :-

(i) MANU/CC/0004/1990 : 1990 (50) E.L.T. 172 - Travancore Cochin Chemicals Ltd. v. Collector of Central Excise ;

(ii) MANU/CC/0073/1990 : 1990 (50) E.L.T. 248 - Cominco Binani Zinc Ltd. v. Collector of Central Excise ;

(iii) MANU/CC/0011/1990 : 1990 (50) E.L.T. 289 - Collector of Central Excise v. Andhra Sugar Ltd. ;

(iv) MANU/CC/0036/1990 : 1990 (48) E.L.T. 283 - Cominco Binani Zinc Ltd. v. Collector of Central Excise ;

(v) MANU/CM/0039/1989 : 1989 (41) E.L.T. 424 - Gujarat Alkalies & Chemicals Ltd. v. Collector of Central Excise ;

(vi) MANU/CE/0070/1988 : 1988 (35) E.L.T. 227 - Collector of Central Excise v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd.

In these cases, electrodes were held to be eligible for the benefit of Credit of duty as goods used in the manufacture of final products. The decision of the Tribunal in Serial No. (vi) relating to the more rigorous scheme under Notification 201/79 was upheld by the Supreme Court on appeal by the Government. This has appeared as news item in 1992 (57) E.L.T. A-77. The learned Counsel, therefore, pleaded that their appeal be allowed.

8. The arguments were opposed by Shri A. Choudhuri, learned Departmental Representative. He supported the order appealed against as far as merits of the issue are concerned. Sand Moulds are in the nature of equipment which are excluded in the definition of inputs in Explanation to Rule 57A. The Sand Moulds are an exempted item as per the exemption Notification. When goods exist in the market, then only Government issues notifications. Tariff sub-heading 8480.00 covers moulds. Any mould is covered thereunder including Sand Moulds. Sand Moulds only are used mostly in Iron and Steel Castings manufacture. The Sand Moulds perform specific function in giving shape to the castings and they are thus equipment. The decisions of West Regional Bench in Mukand Iron & Steel Works and Shivaji Works and the South Regional Bench in Mysore Kirloskar have laid down the correct law. The order may be upheld on this question.

9. Shri Choudhuri, then, argued the appeal filed by the Collector contesting that part of the Order-in-Appeal wherein the Collector has held the demand for the period beyond six months as time-barred. This decision is not correct as the relevant Rule 57-1, at the material time, did not have any time-limit restriction. It was wrong to have applied the time-limit in terms of Section 11A. Shri Choudhuri cited the decision of the Gujarat High Court in Torrent Laboratories v. Union of India 1991 (55) E.L.T. 25 (Guj.) wherein it was held that it is not permissible to read the provisions of Section 11A of the Central Excises and Salt Act, 1944 into Rule 57-1 when the said Rule, before its amendment on 6-10-1988, did not contain a time-limit condition. Shri Choudhuri pleaded that the Department's appeal be allowed and the Collector's order on this aspect set aside.

10. Shri Bagaria, learned Counsel for the respondents, M/s. Hindustan Motors Ltd., in this appeal, replied to the arguments of Shri Choudhuri. He submitted that, as against the judgment of the Gujarat High Court in the case cited by Shri Choudhuri, there is a judgment of the Karnataka High Court in Tungabhadra Steel Products Industries v. Superintendent of Central Excise, reported in 1991 (33) ECC 140 holding that, even before the amendment of Rule 57-1, the time-limit under Section 11A, will be applicable for demand for recovery of Modvat Credit. He cited the following decisions of this Bench regarding the application of time-limit for Modvat recovery cases :-

(i) MANU/CK/0024/1989 : 1990 (47) E.L.T. 132- Collector of Central Excise v. TELCO;

(ii) 1990 (51) E.L.T. 128 - Collector of Central Excise v. Vikrant Televisions;

(iii) MANU/CK/0066/1990 : 1991 (56) E.L.T. 435 - Collector of C. Ex. v. Remington Rand of India Ltd. He, therefore, pleaded that the Department's appeal be rejected.

11. We have considered the submissions made by both the sides. We have perused the record. We have gone through the decisions cited before us. The whole issue hinges on the question whether the Resins can be said to be used in relation to the manufacture of excisable products, castings, though their immediate utilisation is in the preparation of Sand Moulds which are claimed to be not excisable goods themselves, being unstable and not marketable or the Resins are to be taken as used only in the manufacture of Sand Moulds as distinct from manufacture of castings. It is the Department's contention that Sand Moulds are distinct and identifiable goods and that use in their manufacture is not the same as use in the manufacture of castings. The moulds are equipment giving shape to the castings and in view of equipment being excluded from Modvat benefit in terms of Explanation under Rule 57A, the appellants' claim is not admissible. But this contention of the Department as canvassed during the hearing of the appeal by the learned Departmental Representative and as understood and opposed by the learned Counsel for the appellants does not quite get reflected in the impugned orders. The Collector (Appeals) has this to say in his impugned order on the merits of the issue, which is as follows :-

"...As regards merit of the case I do not agree with the appellant that credit is admissible on resin on the basis of Supreme Court's judgment, since the issue relates to the instant appeal is distinguishable from the issues cited therein. Supreme Court dealt with either input of packaging products value of which is includible in the assessable value of the final product or input directly emerges in the manufacture of the finished/final products which is not the case of the appellant. The appellant's impugned product namely 'resin' is nothing but prepared binder used in the sand moulds and cores used either in furnace as a layer for its upkeep and protection against heat or for making moulds. Modvat credit is not admissible on the same if used in maintenance of furnace or exempted moulds...."

Apart from distinguishing the East End Paper Industries and Ballarpur Industries Ltd. decisions of the Supreme Court, he has given his own finding very tersely in two sentences (underlined portion in the above extract). The reference to Resins used in the Sand Moulds and Cores used in furnace as layer for its upkeep and protection against heat appears to be irrelevant and does not arise from the Assistant Collector's order which was carried in appeal before him by the appellants as the Assistant Collector's finding in his order on this issue was only as follows :-

"...In both these cases, the credit of duty paid on 'Resin' is sought to be disallowed on the ground that the said input 'resin' is used in the manufacture of sand moulds which in turn are used as equipment, apparatus or appliances for producing parts and accessories of motor vehicles. These parts and accessories are castings. By virtue of the Explanation to Rule 57A, therefore, the credit taken on resin is inadmissible.

The assessees deny that the sand moulds are equipment etc. in terms of the said Explanation on the ground that these are not of a permanent nature and have only a one-time use.

I am unable to agree with the assessees' contention. Even though the sand moulds do have only a one-time use, these are nevertheless the equipment/apparatus/appliances by means of which the castings are given their shapes.

At the time of personal hearing, the assessees had pointed out that the resin is used not only in the sand moulds but also in the cores, also used in the casting process.

Cores like sand moulds are also the equipment etc., in terms of the said Explanation, used for giving shapes to the castings. Therefore, resin used in the manufacture of cores is also ineligible for Modvat Credit."

From the above, we find that neither in the Asstt. Collector's Order-in-Original nor in the Order-in-Appeal of the Collector (Appeals) has it been said in so many words that the Resins have not been used in or in relation to the dutiable products - Castings; but only in the manufacture of other products viz. Sand Moulds and Cores. The Collector (Appeals) has held that Modvat Credit is not admissible if used for exempted moulds. He has not stated that the moulds are used as equipment and hence get excluded in view of the Explanation in Rule 57A. The said rule and the exclusion of equipment, tool, appliance etc. from Modvat benefit have not been referred to or held applicable to them. However, he has upheld the Assistant Collector's order. We have, therefore, to fall back on the same. The Assistant Collector has held that the Sand Moulds, though having only a one-time use are, nevertheless, equipment/apparatus/appliance by means of which the Castings are given their shape. He has invoked Rule 57A and the Explanation therein. In this order also, there is no express finding that the Resins have not been used in or in relation to the manufacture of the dutiable final products - "Castings" - and hence not eligible for Modvat Credit. But it is to be inferred by implication as the finding is that they have been used in the manufacture of Sand Moulds which, in turn, are used as equipment. Hence the Resins have to be taken to have been used in the manufacture of Sand Moulds and not in the manufacture of Castings. The show cause, however, stated the ground clearly that Resins have not been used in relation to the manufacture of Motor Vehicles and parts thereof. This ground in the show cause notice has been sustained indirectly by the Assistant Collector in his order which has also been upheld by the Collector (Appeals) without really going into the full gamut of the issues involved. However, as the issues have been comprehensively presented before us in the appeal memorandum and in the arguments of both the sides during the hearing as narrated above we proceed to dispose of the same.

12. Shri Bagaria, learned Counsel for the appellants, had pointed out that they are not claiming Modvat Credit for the Resins used in the manufacture or in relation to the manufacture of any product other than Castings, their dutiable product. Resins cannot be said to have been used in the manufacture of Sand Moulds because Sand Moulds are not goods for they have no shelf-life being unstable and incapable of being stored or marketed. In this connection, he had referred to the Supreme Court Judgments in Bhor Industries and Ambalal Enterprises cases wherein the marketability criterion had been laid down as an essential criterion for treating anything as goods for levy of excise duty. The criterion for treating any item as covered by the exclusion in the Explanation under Rule 57A had been laid down in several decisions of the Tribunal which were cited before us. Of these, two appear to be relevant namely, the cases of Avery India and Bimetal Bearings. It is not the manner of functioning and use that is material but what the goods are. They should be machines, tools, appliances etc. as such. If the item is not goods on account of its non-marketability it cannot be equipment etc. We find that the West Regional Bench of the Tribunal had taken an exactly contrary view in Shivaji Works v. Collector of Central Excise, reported in MANU/CM/0004/1990 : 1990 (50) E.L.T. 50 . As this decision has been heavily relied upon by the Departmental Representative and as it has been strongly attacked by the learned Counsel, we have to consider the full implication of the said decision. The relevant portion thereof is extracted below :-

"12...In this case, the final product is iron or steel casting. Inputs are certain chemicals admittedly used in the preparation of sand moulds. These sand moulds are made separately, into which molten metal is poured for getting the required shape of the casting. In our view, it is immaterial for us to consider whether these sand moulds are stable or marketable or whether they could be construed as finished excisable goods. Here the dispute is not about the excisability of the sand moulds. The dispute is with regard to the eligibility of modvat credit on inputs used in the preparation of sand moulds. For this purpose, it is necessary for us to consider whether these sand moulds are not hit under explanation to Rule 57(A). This is the crux of the issue to be considered. Even accepting the assertion made by the learned advocate that moulds other than shell sand moulds are not stable and hence they are not finished excisable goods, the question, still, is required to be considered, as to whether these sand moulds are not hit by the excluded category of items as per the aforesaid explanation or otherwise. Only when the scheme is applicable as laid down in Rule 57( A), the question of going into the applicability of other Rules such as 57(C) and 57(D) is required to be considered. We, therefore, hold that the threshold for the whole issue is Rule 57(A) and for considering whether the scheme is applicable or not, the authorities are required to be satisfied that the inputs do not get excluded by the explanation to Rule 57(A).

13. Now we propose to consider this issue in a greater detail, in the context of the admitted position. Sand moulds whether belonging to the category of stable moulds or otherwise are made independently in the foundry. There is a specific allegation by the department in the show cause notice that these moulds are in the nature of equipment. Shri Hidayatullah's contention that the allegation is cryptic without evidence is not tenable because the allegation in the show cause notice itself opens up as below :

'Sand moulds are in the nature of equipments and used for manufacturing castings. Foundry chemicals as mentioned above are inputs of sand moulds and not inputs of castings.'

The show cause notice clearly says that the sand moulds are in the nature of equipments and foundry chemicals are used as inputs of sand moulds and not inputs of castings. This allegation even during the argument of the learned advocate has not been effectively met or rebutted. He contends that there is no evidence to sustain the allegation that sand moulds are equipments. He does not assert that they are not in the nature of equipment, but asserts that they are intermediate products. We have carefully considered this argument. The term 'equipment' as per the dictionary meaning, is described as an apparatus needed for any operation. Moulds for metals are apparatus needed for casting. They may be one-time use apparatus for casting, all the same they come in the category of equipment only. What more evidence or elucidation is called for, for this allegation is not indicated by the learned advocate. By virtue of explanation to Rule 57(A), modvat credit is not available in respect of such equipment. Since the inputs are admittedly used in the moulds, which are in the nature of equipment, duty paid on such inputs cannot be taken credit against the duty payable on steel casting by virtue of explanation. Thus, at the threshold of the scheme itself, foundry chemicals used in the preparation of sand moulds get blocked by virtue of the provisions of explanation to Rule 57(A). For deciding this question, in our view, it is not necessary for us to go into the question of whether the moulds are in the nature of finished excisable goods or otherwise. Only when it is held that the moulds are in the nature of equipment but are included as inputs as per explanation, we are to go into the provisions of other rules. The department's other allegation was that credit is not to be allowed, since mould is a final product, which is exempted. Since we hold that the Rule relating to applicability of modvat credit namely 57(A) itself blocks the eligibility of inputs used in the equipments, it is needless for us to consider this aspect. Even accepting the argument of Shri Hidayatullah that some moulds may be unstable and are not marketable, all the same, they remain only in the nature of equipment or apparatus and hence come under the purview of explanation to Rule 57(A). Possibly because of the indispensable nature of this equipment i.e. 'moulds', the Government have granted exemption to all moulds for metal casting. If some of the moulds are not 'goods', at the most, they need not claim the exemption, because they are not marketable. On this ground, they do not cease to be an equipment for casting for purposes of interpreting the explanation to Rule 57(A). As regards the argument that sand moulds are intermediate product, this is dealt with along with the consideration of applicability of Rule 5713. The alternative argument proposed by the learned advocate is that the credit should not be denied on the ground that any intermediate product comes into existence during the course of the manufacture of final product and such intermediate product is for the time being exempt from the whole of the duty. In this context, he relied on the provisions of sub-rule (2) of Rule 57(D), which reads as below :

'Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty.'

(Emphasis supplied by us)

14. It is argued that the benefit of Rule 57(D) can be taken if the inputs have gone into any exempted intermediate product, which have come into existence during the course of manufacture of final product. Here, the final product is casting. It is claimed by the learned advocate that moulds are to be construed, as intermediate products.

15. We have carefully considered this plea. It is an admitted position that sand moulds are independently manufactured. They do not occur at an intermediate stage in the product stream of the final product, and hence they cannot be construed to be an intermediate product which have come into existence during the course of manufacture of the final product. In our view, sand moulds can only be construed as manufactured independently and used as apparatus for casting. Hence, the alternative argument based on Rule 57(D) also fails to convince us.

16. Since both the main and alternative arguments of the learned counsel are not sustainable as per our above findings, we dismiss the appeals and uphold the view of the department that inputs used in sand moulds, which are only equipment for casting, are not entitled for modvat credit towards the duty payable on the final product namely castings...."

The crucial finding in this decision is that even if Sand Moulds are not stable and are not finished excisable goods the question will be whether Sand Moulds are not hit by the excluded category of items in the Explanation under Rule 57A. They, therefore, held that the threshold for the whole issue is Rule 57A and the inputs should not get excluded thereunder. They went on to observe that as the foundry chemicals used in the preparation of Sand Moulds get blocked by the provisions of Explanation to Rule 57A at the threshold of the Scheme itself, it was not necessary to go into the question whether moulds are in the nature of finished excisable goods or otherwise. As this finding is not backed by any judicial decision and as the Bhor Industries and Ambalal decisions of the Supreme Court laying down the criteria for excisable goods were not actually considered by them as they did not go into the question of durability, we feel we have to consider the effect of the Supreme Court Judgments. The Supreme Court had laid down that marketability is an essential requirement for deciding the excisability of a product. Even as regards the criterion adopted by the West Regional Bench that the first consideration should be given to Rule 57A referred to by them as the threshold to the whole issue, we have to take note of the fact that equipment, machines etc. have been referred to in the exclusion portion of the Explanation Clause of Rule 57A. The purpose and effect of specifying machine, plant etc. in the said provision is to deny the benefit of Modvat Credit of the duty paid on such goods when they are used in or in relation to the manufacture of excisable final products. Thus, it goes without saying that dutiability of the equipment, appliance, tool etc. is a must for them to be disqualified from the Modvat benefit. This is not possible if they are not goods. Hence there is no getting away from the fact that, to be considered either for inclusion or exclusion in respect of Modvat benefit under Rule 57A, the material or item must be goods, satisfying the test of marketability. If they are not goods and do not attract duty there is no need to exclude them for Modvat benefit. Viewed from another angle, goods are the genus and equipment, appliance, tools etc. are the species. Only the goods belonging to the genus can come under the species. The items cannot be appliance, tools etc. without being goods. Conversely, if certain items are not goods, they cannot be equipment, tools, appliances etc. Hence the question whether Sand Moulds are equipment, tools etc. of the forbidden category, cannot be decided de hors the question whether they are finished excisable goods. In this respect, we have to respectfully differ from the view taken by the West Regional Bench. We do so, taking into account the following factors :-

(a) The effect of the Supreme Court decision on marketability as the criterion for identifying a product as excisable goods had not been taken into account by that Bench as they considered this question not relevant.

(b) While Rule 57A with its Explanation is the threshold vis-a-vis applicability of other Rules 57C and 57D, as rightly held by the West Regional Bench in paras 12 and 13 of their order, the role is reversed when Rule 57A is pitted against the dutiability criterion. This is an earlier threshold which has to be crossed before deciding on the applicability of Rule 57A and whether Sand Moulds are equipment, tools, appliance etc.

(c) The allegation in the show cause notice in that case that Sand Moulds are in the nature of equipment and foundry chemicals are used as inputs of Sand Moulds and not inputs of castings had not been met or rebutted by the Counsel in that case. This issue has been agitated in the present case before us.

(d) There are two contrary decisions of the Special Bench and North Regional Bench, the latter directly regarding Resins used in preparation of Sand Moulds. These will be considered by us later on.

13. We now take note of another decision in Mukand Iron and Steel Works v. Collector of Central Excise cited by the learned Departmental Representative, reported in MANU/CM/0024/1989 : 1990 (48) E.L.T. 552. The West Regional Bench had observed in para 17 of the report that Sand Moulds and other moulds for metal are recognised in the Central Excise Tariff as coming in the category of equipment, apparatus or appliances and that there is a specific exemption given to Sand Moulds classified under Heading 84.80. In view of this position, they held that Sand Moulds are in the nature of equipment or apparatus used for the purpose of castings. As pointed out by Shri Bagaria on the authority of various decisions, the dutiability of an article is not determined by an exemption notification. If the article is not dutiable, exemption would be superfluous and irrelevant. Further the learned Counsel had contended that the observation of that Bench that Sand Moulds, apart from other moulds, have been recognised in the Tariff as coming in the category of equipment, apparatus, appliance, is not correct because there is no such indication in the Tariff. In this respect, we find that though Tariff Heading 84.80 covers, inter alia, moulds, it does not directly follow that the Tariff recognises Sand Moulds as coming in the category of equipment, apparatus, appliance etc. Here also, Sand Moulds have to pass the test of marketability to attract classification under the sub-heading 8480.00. Section Note 5 under Section XVI has been referred to by the Bench in para 17 of their order. It has been stated therein that according to the said Section Note, the expression, machine, means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or Chapter 85. But the Section Note itself begins with the words - "For the purposes of these Notes". Hence the scope of the above clarification is limited to the Notes only. As stated earlier the first requirement is that the item should be goods. The sub-heading 8480.00 would thus refer to moulds which are goods for purposes of excise levy. In view of our decision that Sand Moulds are not goods to qualify for exclusion under Rule 57A, they cannot be classified under 8480.00 and cannot be treated as moulds falling thereunder and hence they are not equipment, appliance etc. for purposes of Rule 57A.

14. The Departmental Representative referred to the decision of the South Regional Bench in Mysore Kirloskar Ltd. v. Collector of Central Excise, reported in MANU/CC/0005/1990 : 1990 (50) E.L.T. 175 . It was held by that Bench that inputs used in the manufacture of Sand Moulds which are themselves in the nature of tools or apparatus have to be held to be used in the manufacture of Sand Moulds and not in or in relation to the manufacture of castings. It was also held that the benefit under Rule 57D is not available to them as Sand Moulds do not qualify to be intermediate goods. In that case, the stand taken by the appellants was not that Sand Moulds are not goods as has been contended here. Instead, it was pleaded that Sand Moulds are used only once and therefore, they are not appliances etc. On this limited question there can be no two views. If an article is an equipment otherwise, it does not lose that identity or status only on the ground that it is used only once. But as the plea taken in the present appeal that sand Moulds are not goods for excisability was not before the South Regional Bench and as they did not give their decision from that standpoint we would be justified in deciding the matter on merits.

15. We now turn to the two decisions cited by the learned Counsel in respect of Hindustan Sanitaryzuare & Industries and Leader Engineering Industries, reported in MANU/CE/0095/1991 : 1991 (55) E.L.T. 248 respectively. It was field in the former case that Plaster of Paris used in the production of Plaster of paris moulds which constituted an input for the manufacture of ceramic products were eligible for exemption in terms of Notification No. 217/86. This case has a parallel with the present case because Notification No. 217/86 is similar to the Modvat Scheme with the list of inputs and final products being le same, the difference being that in Modvat, duty paid on inputs qualifies for benefit of Credit while under Notification 217/86, the inputs which are manufactured in a factory and captively consumed in the same factory are eligible for duty exemption. Another point of similarity is that the Plaster of Paris moulds are exempted from duty under Notification No. 221/86 dated 2-4-1986 just as there is an exemption for Sand Moulds. There is also a proviso in the Notification No. 217/86 which is similar to Rule 57C that nothing contained in the notification shall apply to inputs used in or in relation to the manufacture of final products exempt from the whole of duty or chargeable to nil rate of duty. The Tribunal held that even presuming that Plaster of Paris moulds are goods falling under Chapter 68 of the Schedule, they saw no reason why the benefit under Notification 217/86 cannot be extended to Plaster of Paris used in the manufacture of ceramic products. They proceeded to state at paras 13 and 14 of their order as under :

"13. The above view would also lead to a harmonious construction of Notifications 217/86 and 221/86. In terms of the latter, plaster of paris moulds used in the factory of their production for manufacture of ceramic products are exempt from excise duty. In the present instance, plaster of paris moulds have been produced in the appellants' factory and they are used for manufacture of ceramic products. Now, Plaster of Paris moulds, it goes without saying, can only be manufactured from Plaster of Paris. If it is held that Plaster of Paris moulds are final products for the purpose of Notification 217/86 and are denied the benefit of Notification 221/86 when used in the manufacture of ceramic products, the net result would be that plaster of paris moulds produced in the factory and used in the manufacture of ceramic products would be denied exemption from duty though this is one of the specific objects of Notification 221/86. Such an obviously absurd result cannot be brought about by a process of construction. In our opinion, therefore, the view which we have taken is the appropriate one to take on the facts and in the circumstances of the case.

14. In the light of the foregoing discussion, we set aside the impugned order and allow the appeal with consequential relief to the appellants. In the view we have taken, we do not consider it necessary to discuss the other contentions raised by the appellants such as limitation, whether plaster of paris moulds are goods etc."

16. While coming to this conclusion, the Mysore Kirloskar case cited by the Departmental Representative in support of the Department's case was also taken note of. The present case we feel, is on stronger ground because Sand Moulds are unstable and not marketable. No such plea was taken specifically in that appeal though, in the adjudication order leading to the appeal, their contention that Plaster of Paris moulds are not marketable goods was not accepted. It was ruled that the moulds are not crude and that they can certainly be bought by anyone who requires them. Such a finding is not there in the present matter. On the other hand, there is a categoric claim by the appellants that Sand Moulds are unstable and incapable of being marketed and, on that score, they are not goods.

17. The decision of the North Regional Bench in Collector of Central Excise v. Leader Engineering Works, reported in 1992 (38) ECR 361 (CEGAT-NRB) is directly on the same point with which we are concerned. The relevant paragraphs of the said decision are extracted below :

"35. In so far as the Items 8 to 12 Annexure 1 are concerned it is observed that these are chemicals which are admittedly utilised in the preparation of sand moulds and sand cores which are themselves utilised for casting the metal cocks and valves and a question has arisen whether they can be considered as inputs eligible for benefit under the Modvat scheme or hit by the bar regarding equipments/apparatus. Besides, the department has pleaded that these raw materials are actually used for the manufacture of sand cores and moulds and these sand cores and moulds are in the nature of equipment which is used for manufacture of valves and cocks. Hence, these chemicals are not eligible for Modvat benefit.

36. The respondents on the other hand has pleaded in the main that the sand cores and sand moulds are not equipments but are items which themselves get consumed in the process of manufacture of valves and cocks. Hence, Modvat credit benefit was available to them in respect of these chemicals.

37. In this respect we notice that the respondents have filed a detailed affidavit and in so far as it relates to the process of making sand moulds and cores the facts have not been contradicted or denied as such by the department.

38. The learned DR on the other hand has drawn our attention to the classification of moulding boxes for metal foundry, Mould bases, Moulding patterns and moulds for metal or metal carbides which filed a photocopy of the SCCM pages 1319 and 1320 showing such items as classifiable under 8480.30 and indicating that in general the essential function of a mould is to retain the material in a predetermined shape while it sets; some moulds also exert a certain pressure on the material. The DR has also argued that such moulds and cores are excisable and even dutiable unless exempted.

39. We have considered these submissions and observed that the process of manufacture of cocks and valves shows that the chemicals in question are utilised in the process for preparing specified cores and moulds which are utilised further for casting of metal valves and cocks and the coming into existence of the sand core patterns of required specifications merely constitutes, as such, a stage in the process of manufacture of valves and cocks. This coming into existence of sand cores and sand moulds temporarily does not alter the basic fact that the chemicals in question essentially act as inputs for processes which ultimately result(s) in the manufacture of metal valves and cocks. In this process the moulding boxes, the pattern plates and ore boxes act as equipment but sand cores and moulds do not exactly fall in the same category, being articles which temporarily come into existence at a particular stage of manufacture of valves and cocks.

40. The appellants have already given an affidavit that these sand cores and sand moulds get destroyed during use and are neither sold nor are saleable in market and no evidence has been produced to the contrary. Reference to an exemption notification in this context and Board's clarification/instructions on this point therefore does not help the cause of the department. The fact that moulds and moulding patterns for metals fall under 8480.30 also docs not help the cause of the department in the above context. Further in the context of the process of manufacture and the point noted by us regarding the stages of manufacture the whole question boils down to that of direct or indirect use of the chemicals in the process of manufacture of valves and cocks; and, we observe that there is nothing in the Modvat scheme which would bar the benefit being extended to such inputs which are indirectly utilised in the production of the final output.

41. Viewed from this angle the chemicals in question are required to be considered as inputs the use of which ultimately results in the manufacture of valves and cocks."

We respectfully follow the above decision which is directly on the very issue which is for decision in the present appeal. Our decision is further fortified by our specific finding, agreeing with the contention raised by the appellants that Sand Moulds are unstable and not marketable and hence not excisable goods. We, thus, hold that the use of Resins in the preparation of Sand Moulds which are not excisable, is not a separate manufacturing process, having for its aim, the emergence of the excisable product, Sand Mould. Instead, the preparation of Sand Mould is a process in or in relation to the manufacture of the final products. In that view of the matter, the contention that Resins are inputs in relation to the manufacture of the dutiable castings raised by the appellants, is agreed to by us. As held in the Leader Engineering Works case, there is nothing in the Modvat scheme which would bar the benefit being extended to such inputs which are indirectly utilised in the production of the final product. The scope of the benefit is not only for goods used in the manufacture of, but in relation to the manufacture of the final product. The use of Resins in the preparation of Sand Mould is not a separate manufacturing exercise delinked from the manufacture of castings but part of that ultimate process. The appeal merits acceptance and we order accordingly.

18. Since we have allowed the appeal on merits, the Department's appeal challenging the decision of the Collector (Appeals) limiting the scope of the demand to a period within six months and holding that demand for the period beyond the said period of limitation time-barred to be hit by time-bar would lose its relevance. However, since we have heard the submissions in respect of that appeal also, we hold that the decision of Collector (Appeals) on the question of time-bar would be in order. With due respect to the decision of the Gujarat High Court in the Torrent Laboratories case cited by the learned Departmental Representative in his arguments, we find that there is a contrary judgment of the Karnataka High Court in Tungabhadra Steel Products Ltd. v. Superintendent of Central Excise, reported in 1991 (33) ECC 140 which has relied upon the decision of the Supreme Court in J.K. Spinning & Weaving Mills v. Union of India, reported in MANU/SC/0403/1987 : 1987 (32) E.L.T. 234 . In that case, the time-bar as specified under Section 11A while regulating short-levies in terms of the Finance Act, 1982 which had no in built time-limit requirements, was held to be applicable. We respectfully follow the Karnataka High Court Judgment and uphold the Collector (Appeals') order. We, therefore, reject the Department's appeal.

19. Before parting with the matter, we would like to observe that in the context of the divergent decisions in the matter we have decided to follow the North Regional Bench decision in the Lender Engineering case as we share the same views and have given our additional findings also in support of the view taken by us. If this decision and the decision in the case of Hindustan Sanitaryware & Industries were not there, we might have considered referring the question to the Honourable President of the Tribunal to constitute a Larger Bench to decide the issue and resolve the difference. However, we are not doing so as we find that the decisions we are departing from had been given when certain arguments presented before us and considered by us were not canvassed before our learned Brothers in the West and South Regional Benches. In this connection, we recall the observations of the Tribunal in Collector of Central Excise, Rajkot v. Surgichem, reported in MANU/CE/0244/1986 : 1987 (27) E.L.T. 548 wherein certain discussions in Salmond on Jurisprudence on decisions passed sub silentio and the non-binding nature thereof, have been referred to. A decision without argument, without reference to the crucial words of the rule and without any citation of authority, would not be binding and such a precedent sub silentio is not authoritative. The same principle was followed in a subsequent decision of the Tribunal in Tata Engineering Locomotive Co. Ltd. v. Collector of Customs, reported in MANU/CE/0110/1991 : 1991 (55) E.L.T. 563 . The action taken by us in deciding the present case as above would be in conformity with the principles regarding sub silentio precedents referred to above.