ORDER

K. Sankararaman, Member (T)

1. The appeal by M/s. Associated Cement Companies Ltd., received by the Registry on 27-10-1988 arises from the order in appeal received by them on 26-7-1988. It is thus late by one day, the last day for filing the appeal being 26-10-1988. The delay has been explained by the learned consultant, Shri R.M. Das appearing on their behalf, as due to postal transit. They had sent the appeal by registered post from Bombay on 22-10-1988 and it is marginally late, by one day. He pleaded that the delay may be condoned and the appeal heard on merits.

2. Shri M.N. Biswas, learned SDR, has no objection. The request is allowed and the delay condoned.

3. The appeal is against the order in appeal passed by the Collector of Central Excise (Appeals), Calcutta, rejecting their appeal before him filed by their Khalari Cement Works challenging the decision of the Assistant Collector of Central Excise, Ranchi Division rejecting their application for availing modvat benefit in respect of various goods claimed to be used in or in relation to the manufacture of cement. The Collector (A) had partly allowed their appeal to the extent of granting the benefit only in respect of grinding media but dismissed their appeal otherwise. He has gone by his previous decision relating to another factory of theirs at Chaibasa and observed that as the issues were identical, he applied the same order. A copy of the said order was incorporated in his order which is the subject matter of the present appeal. A statement showing the products, the Chapter number under which they fall for classification and their use in or in relation to the manufacture of cement furnished by the appellants was also enclosed to the impugned order. The list is appended to this order with our findings on their eligibility for modvat benefit. The grounds on which the Collector (Appeals) had held the products in question to be ineligible for the benefit of modvat discussed in his earlier order in the appeal relating to their Chaibasa factory which have been adopted by him in his impugned order are as follows :

"While the appellants are manufacturers of cement, they want modvat of duty paid on some of the items like even tyres, tubes, iron and steel, angle, channels, used for general structural and maintenance purposes, railway construction materials, part and accessories of motor vehicles. There arc certain items which appear to be required for maintenance purpose. By no stretch of imagination such can be considered "inputs" used in or in relation to manufacture of cement".

4. In their appeal the appellants have submitted that modvat credit under Rule 57A would cover a much wider spectrum of excisable goods used than Notification No. 201/79 dt. 4-6-1979 and Rule 56A which limited the benefit to the duty paid on inputs and component parts. They had referred to the case of J.K. Cotton Spinning and Weaving Mills Company Ltd., v. Sales Tax Officer -1965 (16) STC 563 where the scope of the expression "used in the manufacture of" had been interpreted by the Hon'ble Supreme Court. In Rule 57 A the words are wider in scope and cover even goods used in relation to the manufacture. The restrictions on the admissibility of credit of duty paid on inputs is found in Rule 57A itself. They have been referred to the undermentioned judgments which followed the J.K. Cotton Spinning Weaving Mills Co. Ltd. case.

(1) Vasuki Carborundum Works v. State of Gujarat -1979 (43) STC 294 Gujarat High Court.

(2) Mercury Pharmaceutical Industries v. State of Gujarat -1979 (43) STC 301 Gujarat High Court.

(3) Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar -MANU/SC/0320/1964 : 1965 (16) STC 259 S.C.

(4) Member, Board of Revenue v. Phelps Company Pvt. Ltd. -1972 (29) STC 101 Supreme Court.

(5) Avery India Ltd. v. Commercial Tax Officer -1983 (52) STC 297 Calcutta.

5. In the light of these judgments, they prayed that their declaration for Modvat credit be accepted and credit granted in toto.

6. When the appeal came up for hearing, Sri R.M. Das learned consultant for the appellants appeared for them. He referred to the submissions made in the appeal memorandum and pleaded that the same be accepted. He stressed the fact that credit is admissible for the specified inputs used in the manufacture of specified outputs as well as for those used in relation to the manufacture of the particular output. This wider scope of admissibility would support their case, he pleaded.

7. Sri M.N. Biswas, learned SDR, opposed the submissions made in support of the appeal. He contended that the inputs in question which are sought to be covered under the Modvat Scheme belong to the excluded category of inputs as per the explanation clause in Rule 57A. They are thus outside the scope of Modvat benefit. He referred to a decision of this Bench in a similar matter whereunder a similar appeal of the same appellants had been rejected [MANU/CK/0016/1990 : 1990 (50) ELT 295 (Tri.) - Order No. 221/Cal/1990-221 dated 11-5-1990 in appeal No. E-128/88]. He, therefore, pleaded that on the same basis the present appeal may be rejected.

8. We have given careful consideration of the submissions made on behalf of both the sides. We have perused the record. We have also gone through the judgments cited. We find that, as pointed out by Sri Biswas, SDR, the appellants had filed a similar appeal earlier which has been rejected by us. The decision dated 11-5-1990 has recently been reported in MANU/CK/0016/1990 : 1990 (50) ELT 295. In that appeal the Supreme Court judgment in the J.K. Cotton matter (Si. No. 1 in the list above) was cited as has been done now also. Two Tribunal decisions had also been cited earlier wherein it had been held that inputs used for the production of an intermediate product which alone went into the manufacture of the final product were entitled for exemption under Notification No. 201/79. These have not been cited now. We find that the appellants have cited the cases at SI. No. 1 to 5 supra in the present case which had not been referred to by them in the earlier case. We shall examine the said case also.

9. In the J.K. Cotton matter the Supreme Court had held, as pointed out by the appellants, that the expression "used in the manufacture of should normally encompass the en tire process carried on 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 fall within the expression "used in the manufacture of. The judgments figuring at SI. Nos. 1., 2 and 3 in the list of cases cited above related to application of Central Sales Tax while the last two related to Bengal Financial (Sales Tax) Act. As regards the former Act, the relevant provision therein (Rule 13 of the rules framed under Section 13) covers goods intended for use as raw materials, processing materials, machinery, plants, equipment, tools, spare parts, accessories, fuel or lubricants in the manufacture or processing of goods for sale or in mining or in the generation of electricity or any other form of power. Thus while modvat benefit is available for goods used in or in relation to manufacture of eligible outputs or final products, the coverage under the Central Sales Tax was much wider extending, in addition, to use in mining or in generation of power also. Even machinery, plant, equipment, tools, spare parts, accessories, fuel and lubricants used in the manufacture are covered therein.

10. In the case at SI. No. 3 viz.. Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes also under the Central Sales Tax the Supreme Court observed that in a case where a dealer is engaged both in mining operations and in the manufacturing processes - the two processes being interdependent - it would be impossible to exclude vehicles which are used for removing from the place where the mining operations are concluded to the factory where the manufacturing process starts. The process of mining ore and manufacture with the aid of such ore, copper goods, is an integrated process and there would be no ground for exclusion of the vehicles used for removing goods to the factory after the mining operations are concluded. Accordingly, they reversed the finding of the Patna High Court excluding locomotives and motor vehicles used by them after the mining operations were concluded and before the manufacturing process commenced and also vehicles used for carrying finished products from the factory on the conclusion of the process of manufacture. The High Court had held that these vehicles were not intended for use in the manufacture or processing of goods or in the mining operations. It was this view which was reversed by the Supreme Court, goods intended for use inter alia in mining being also covered by the relevant provisions. The Supreme Court, however, held, while rejecting the claim for the grant of benefit to hospital equipments and fittings/furnishing, medical supplies and stationery that the expression intended to be used cannot be equated with likely to facilitate the conduct of the business of manufacturing or of processing goods or of mining. They, however, allowed the appeal in respect of baskets required for carrying ore and other materials used in mining or in manufacture of goods. The scope of the expression "used in the manufacture of in Central Excise provisions came up for decision before the Supreme Court in Collector of Central Excise v. Ballarpur Industries Ltd. reported in MANU/SC/0115/1989 : 1989 (43) ELT 804 SC. In the said judgment the Supreme Court upheld the decision of the Tribunal that Sodium Sulphate used for the bleaching of pulp should be considered as raw material, in the manufacture of paper. The contention in the appeal that it is used at a stage anterior to the actual manufacture of paper was repelled by the Court as it was held that manufacture of pulp is an integrated process of manufacture of paper and covered in the definition of manufacture as given in Section 2(f) of Central Excises Salt Act, 1944 which takes within it all ancillary and incidental processes. They noted that its utilisation was in the manufacturing process as distinct from the manufacturing apparatus.

11. The above mentioned distinction between use in the manufacturing process on the one hand and manufacturing apparatus on the other comes into sharper focus in the context of the modvat provisions. In the explanation of the term inputs, machines, machinery, plant, equipment, apparatus, tools or appliances have been specifically excluded from the scope of modvat benefit. The decisions cited by the appellants will not be relevant in deciding the present appeal in view of the said explanation which sets the modvat provisions apart from the Central Sales Tax Act provisions. Accordingly, the claim for modvat benefit in respect of goods in the nature of equipment, machines, tools, appliances, machinery and maintenance items will not be admissible. While the type of goods covered in SI. No. 3 namely, Indian Copper Corporation, include items like locomotives, motor vehicles which are not relevant in the modvat context, we have to take note of the principles laid down by the Supreme Court treating the process of mining of copper ore and manufacturing of copper goods with the aid of such copper ore as an integrated process. This view is wider in scope than the view taken by the Supreme Court itself in the subsequent case of Collr. of C. Ex. v. Ballarpur Industries Ltd., wherein only the attempt to dissect the process of manufacture of pulp and manufacture of paper therefrom was disapproved. In the earlier case of Indian Copper Corporation even mining and manufacture if carried on by the same dealer have been considered to be an integrated process. Though the judgment was in the context of Central Sales Tax, provisions whereunder cover not only goods intended for use in manufacture but also in mining, the observations of the Supreme Court that mining operations and manufacturing process are interdependent and constitute an integrated process would not be confined to only the Sales Tax matters but be applicable in respect of Rule 57A of Central Excise Rules relating to modvat also. It is noteworthy that the eligible inputs are not only goods used in the manufacture of final products but also those used in relation to the manufacture. The mining of the minerals used in the manufacture is in relation to the latter and in view of the observations of the Supreme Court treating the two operations carried on by the same person as integrated process, goods which are otherwise eligible for mod-vat benefit would be entitled to said benefit even if used in the mining operation carried on by the manufacturer in relation and as a prelude to such manufacturing operations.

12. We shall now first deal with the case law cited by the appellants in support of their claim. In the case relating to Vasuki Carborundum Works (SI. No. 1 in the list of cases in para no. 4 supra) it was held that twine (Katha) was held to be intended for use in the manufacture. For modvat purposes twine could be considered as packaging material but its Tariff classification may keep it out, as goods of Textile chapters are not covered in the modvat scheme. As regards the Mercury Pharmaceutical matter (SI. No. 2 in the list in para 4 supra) the concerned goods were glass ampules. They would be eligible inputs under the modvat scheme. The Indian Copper Corporation case covered a variety of goods. Applying the ratio of the above judgment to the present case and taking into account the specific provisions in the Central Excise Rules the benefit of modvat cannot be extended to goods in the nature of machines, appliance, tools, equipment etc. as also goods used in relation to the apparatus as distinct from the goods used in relation to the manufacture. We have given our findings item-wise in the list of goods furnished by the appellants in the earlier proceedings before the Collector (Appeals). With regard to the goods used in the mining process the ratio of the Supreme Court decision will be applicable only if the appellants are themselves engaged in that process and not for the mined products procured by them from others.

As regards chemicals used for treatment or purification of water, the benefit would be available only if such water is for use in the manufacturing process like preparing the slurry or generation of steam for the manufacturing process. In this regard, we follow our decision in Indian Explosives Ltd. v. Collector of Central Excise, (Order No. 170/Cal/1990-170 dt. 30th April, 1990) reported in MANU/CK/0016/1990 : 1990 (50) ELT 295. The relevant extracts from the said order are reproduced below:

"Shri Biswas, learned SDR raised a point that the purification of water for the purpose of production of steam is being carried out by the appellants mainly with a view to protect the boilers from being corroded by untreated water and this is not an essential process for manufacture of explosives as even without such treatment, water can be boiled and steam produced. We are not inclined to agree with this submission, since we find that in Fertiliser Corporation of India Limited v. Collector of Central Excise, Patna, decided by the Tribunal and reported in 1987 (12) ECR 535 it was held that use of sulphuric acid in the manufacture of Sodium Hexameta Phosphate for water treatment essential for manufacturing fertiliser amounts to ultimate use in the manufacture of fertiliser. The particular exemption was in respect of sulphuric acid used for manufacture of fertiliser. Even though part of sulphuric acid was used as stated above for the manufacture of a chemical which was required only for water treatment, it was held to be essential for the manufacture of fertiliser and, therefore, amounts to ultimate use in the manufacture of fertiliser. Following the above decision we hold that the chemicals used for treatment of water for production of steam would entitle the appellants to derive the benefit admissible to materials required for the manufacture of explosives. Accordingly, we allow the appeal. The appellants would be entitled to consequential benefits".

However, if the water is used for non-manufacturing purposes viz. as drinking water, the benefit would not be admissible. The appeal is disposed of accordingly.