ORDER

V.P. Gulati, Member (T)

1. These two appeals arise out of the common order of the Collector of Central Excise (Appeals), Madras. The assessees viz. Shimoga Steels Ltd. are aggrieved against the findings of the lower appellate authority holding that Tundish Boards, Sodium Silicate, Acetylene, Thermo Couple Tips and Refractory Cement are not eligible for the benefit of MODVAT Credit. The Revenue in the appeal is aggrieved against the benefit of MODVAT Credit allowed in respect of Graphite Nipples.

2. The learned Counsel for the appellant (Shimoga Steels) pleaded that in a number of decisions it has been held that MODVAT Credit is available in respect of Acetylene Gas. In this context he cited the case law reported in MANU/CM/0024/1989 : 1990 (48) E.L.T. 552 in the case of Mukund Iron and Steel Works Ltd. In respect of Thermo Couple Tips he pleaded that the Central Board of Excise and Customs have clarified on 17-7-1987 [1988 (33) E.L.T. (T.21]) that Pyrometer Tips is eligible for the benefit of MODVAT Credit. A later clarification has been issued in 1990 extending the same benefit in respect of Thermo Couple Tips also. He pleaded that in view of this, the benefit of MODVAT Credit should have been allowed in respect of Thermo Couple Tips. In regard to Tundish Board he pleaded that these are applied to the inner surface of the furnace and for the protection of refractory bricks. He pleaded that the matter should not be viewed from the point of view of whether these are consumables as such or not but with reference to the use of the item in a particular manufacturing process and he pleaded that it may appear that since Tundish Boards are applied as the inner linings of the furnace these are not consumables, but the fact remains that some of the elements contained therein get to mix in the melt in the furnace contributing to its properties. He, however, did not furnish any technical material in this regard. In regard to ramming mass, he pleaded that the same was also used for the protection of the refractory bricks. He pleaded that the matter stands covered against the appellant by the order of this Bench in the case of Sathya Steel Strips Pvt. Ltd. v. CCE, reported in MANU/CC/0034/1988 : 1988 (38) E.L.T. 485 and also the order of the West Regional Bench, Bombay reported in MANU/CM/0024/1989 : 1990 (48) E.L.T. 552. He pleaded that in view of what he has stated earlier, benefit of MODVAT Credit should be allowed in respect of ramming mass.

3. Shri J.P. Gregory, the learned SDR adopted the reasoning of the learned lower authority in respect of the above items. In regard to Graphite Nipples for which the lower authority has allowed MODVAT Credit, he has pleaded that its use is in the nature of an equipment or apparatus and, therefore, MODVAT Credit should not be allowed. The learned Counsel for the Respondent (Shimoga Steel) in this regard pleaded that Graphite Nipples get consumed along with electrodes and, therefore, MODVAT Credit should be allowed in respect of this item.

4. We observe that so far as Acetylene Gas is concerned this Bench of the Tribunal as also other Benches held that benefit of MODVAT Credit is available in respect of Acetylene Gas being a consumable item used in the manufacturing process and following the ratio of our earlier decisions and that of the West Regional Bench, in the case of Mukund Iron and Steel Works Ltd. v. CCE, reported in MANU/CM/0024/1989 : 1990 (48) E.L.T. 552, we allow the appellant's plea (Shimoga Steels Ltd.) for the benefit of MODVAT credit in this regard.

5. So far as Thermo Couple Tips (Pyrometer Tips) are concerned, the Central Board has allowed the benefit of MODVAT Credit in respect of Pyrometer Tips. The Collector (Appeals) has not gone into the fact as to how Thermo Couple Tips and Pyrometer Tips differ and also not given any finding whether Thermo Couple Tips get melted by one use. The appellant has also not produced any technical literature in this regard. We, therefore, hold that further examination will have to be done to ascertain whether or not Pyrometer Tips and Thermo Couple Tips are different and in case these answer to the same description and use is similar to Pyrometer Tips, the learned lower authority should consider the matter in the light of the instructions of the Board, cited supra. We, therefore, set aside the order in respect of Thermo Couple Tips and remand the matter for de novo consideration as above.

6. In regard to Sodium Silicate, Ramming mass and Tundish Board, the admitted position is that these are materials used in the furnace. Tundish Board is said to be for protection of the refractory bricks and also it has been stated that some element of Tundish Board gets released into the metal mix and adds to its characteristics. No technical literature has been produced in this regard. However, taking into consideration the use of the same that it is a lining material for the furnace, we hold in the light of our earlier decision, reported in MANU/CC/0034/1988 : 1988 (38) E.L.T. 485 and also West Regional Bench decision reported in MANU/CM/0024/1989 : 1990 (48) E.L.T. 552 that the same being used as part of the furnace, it should be taken to have been used in relation to the equipment for the manufacture of steel and for that reason benefit of MODVAT Credit cannot be allowed. Likewise, sodium silicate and ramming mass are also not eligible for MODVAT Credit. We observe that in the case of the Andhra Pradesh Paper Mills Ltd. v. CCE, Guntur, decided by this Bench on 4-4-1990 in Appeal Nos. E/267 268/89 -MANU/CC/0008/1990 : 1990 (50) E.L.T. 252 (Tribunal) the Bench has taken note of the observations of the Hon'ble Supreme Court in the case of JK Cotton Spg. and Wvg. Mills Co. Ltd. v. Sales Tax Officer, Kanpur (1965) 16 S.T.C. 563 (SC) -1961 1 SCR. 900, which is reproduced below :-

"The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would in our judgment, fall within the expression 'in the manufacture of goods."

In the same context of MODVAT Credit, the Hon'ble Supreme Court in the case of CCE, Calcutta-II v. Eastend Paper Industries Limited reported in MANU/SC/0107/1989 : 1989 (43) E.L.T. 201 (SC) have held as under :

"...Anything required to make the goods marketable must form part of the manufacture and any material or any material used for the same would be component part for the end-product...."

The observations of the Bench in the Andhra Pradesh Paper Mills Ltd., cited su] are reproduced below :

"...Therefore, for the items to pass the test of eligibility to the benefit of the MODVAT Credit will be such that they participate in the process of manufacture without which the end-product cannot be produced. In the present case, in the case of chemicals used, the learned SDR fairly concedes that so far as softening of water is concerned, the same is a process which is for the manufacture of paper and softening of water is a requirement for the manufacture of paper. He has thus conceded that soda ash used in this process would also be eligible for the benefit of MODVAT Credit. In regard to the other chemicals the position is, however, different. Hydrochloric acid is used for cleaning of the wire mesh as and when the same is found to have been clogged. The question is whether this cleaning operation can be considered to be a process of manufacture. Admittedly it is a process of maintenance of the wire mesh to keep it in the desired condition. Therefore, it cannot be said to have been used in the process of manufacture of paper. However, a point can be made that the same is used in relation to the manufacture of paper. The expression 'used in relation to the manufacture' of paper no doubt has a wider meaning than the words 'in the manufacture', in the context of the credit scheme and, therefore, it can be pleaded that hydrochloric acid has been used in relation to the manufacture of paper. The expression 'in relation to' has to be read in the context of the manufacturing process of the finished goods covered under the MODVAT Scheme. There may be processes which are preparatory in nature and anterior to the start of the manufacturing stream of the finished product but which have to be essentially carried out before the actual manufacturing process of the goods can start or these may be related to the preparing of the material which have ultimately to go into the manufacturing stream or in preparing of certain materials which directly or indirectly participate in the manufacturing process in a manner that these help in the process of manufacture to be carried a step further. The inputs used in these processes for manufacture of the products which are in turn used in the manufacturing stream of the finished product can be taken to have been used in the manufacture or in relation to the manufacture of the end-product.... We observe that while allowing MODVAT Credit regard will have to be had to the purpose of the scheme i.e. to reduce the cascading effect of the duty on the finished product by way of relief on the duty paid in respect of the goods which are used in or in relation to the manufacture of the finished product. The machineries, equipments and apparatus by themselves have been precluded from the benefit of the MODVAT Credit. Cascading effect of the duty paid on the machinery used in or in relation to the manufacture of the finished goods is not to be mitigated and as a corollary thereto the parts which are used in these machineries to make them functional also are not entitled to the benefit of the MODVAT Scheme. These parts which are used as replacement from time to time have to be held to have been used in relation to the machines themselves and not in relation to the manufacture of the goods. In the scheme of MODVAT if the parts of the machines are included there is no reason why the lighting equipment and other structural fittings which are used in the factory in which the goods are produced would not have to be allowed the benefit of the input duty relief under the MODVAT Scheme. Going by the ratio of the judgment of the Hon'ble Supreme Court cited supra, it has to be concluded that the credit has to be allowed only in respect of such of those inputs which are used in the process of manufacture and which go directly into the manufacturing stream by themselves or are used in the manufacture of materials which go into the manufacturing stream resulting in the manufacture of the end-product."

In view of above, we hold that appeal of Shimoga Steels Limited is partially allowed in the above terms.

7. So far as Graphite Nipples are concerned, the learned lower authority had taken note of the appellant's plea that the same get consumed along with electrodes and for that reason, therefore, MODVAT Credit in respect of the same is available as in the case of electrodes. There is no plea to the contrary that Graphite Nipples used do not get consumed alongwith electrodes. We, therefore, following the ratio of our earlier decision, where we have held that MODVAT Credit in respect of graphite electrodes is available, hold that MODVAT Credit has to be allowed in respect of nipples also. In this view of the matter, the appeal (E/601/89/MAS) of the Revenue is dismissed.