ORDER

V.P. Gulati, Member (T)

1. This appeal is against the order of the Collector of Central Excise (Appeals), Madras. The Collector of Central Excise, Coimbatore is aggrieved of the decision of the learned Collector (Appeals) in allowing the benefit of MODVAT Credit in respect of anti-rust oil and electroplating salts. The learned Collector (Appeals) has held as under :

"On going through the above submission, I find that the usage of chemicals is more or less akin to the usage of Rust Preventive oil, which the lower authority has considered as an input, equating it to paint. While the anti-rust preventive oil is used to keep the fully manufactured bearings free from rust, the chemicals are used during the course of manufacture of Bearing themselves. The chemicals are claimed to constitute a plated overlay on bearings, which is nothing but equivalent to quoting with paint. Their usage over a period of time is of no consequence. Therefore, chemicals can hardly be termed as "Capital Goods" and equated to surface grinders. Moreover, the term "capital goods" would apply on lay to "goods" capable of producing goods. The impugned order being one based on a ground which cannot be sustained, I set aside the same and direct the lower authority to extend MODVAT Credit on chemicals also, which are used either in or in relation to the manufacture of final products."

2. The learned Collector in his grounds of appeal has urged as under :

"The functions of the chemicals cannot be equated with those of Paints or the RPO. The paints and the RPO are applied on the finished products and remain with them to keep the products free from rust; whereas, the chemicals in the instant case are used only in an apparatus which produces plated overlays. It is only these plated overlays, which get overlaid on the Bearings, form part of the Bearings. Hence only the plated overlays can be equated with Paints or RPO and not the chemicals.

The learned Collector (Appeals) has argued that the chemicals can hardly be termed as capital goods, and that the term capital goods applies only to goods capable of producing goods. Capital goods do not mean only goods that are capable of producing other goods; it rather means goods that are used in producing other goods. It is therefore clear from the foregoing that the chemicals in question, could very well be termed as capital goods. The chemicals in question are consumable but do not either form part of or go into the Bearings. Their nature of function is that of apparatus, machinery or tool, as the case may be. As such they do not qualify for MODVAT credit in terms of Rule 57A."

3. The learned SDR reiterated the grounds of appeal.

4. The Respondents have cited the following case laws in support of the order of the lower appellate authority:

(1) MANU/CC/0036/1990 : 1990 (48) ELT 283 (Tribunal) in the case of Cominco Binani Zinc Ltd. v. Collector of Central Excise.

(2) MANU/CC/0073/1990 : 1990 (50) ELT 248.

5. We observe that the items in question are anti-rust oil and chemicals used for electroplating purposes. So far as anti-rust oil is concerned, the original authority has held that the same is eligible for MODVAT Credit. So far as the chemicals are concerned, these are admittedly used in the electroplating process and get consumed in the electrolyzing hath and these as has been explained by the learned Collector in his grounds of appeal, are admittedly used in the electroplating. Some of these are solvents and some are catalysts and they have to be replenished periodically as the strength of the Electrolyte comes down. These chemicals are used for de-greasing etc. Hydrochloric Acid is used for Anodic Bathing.

6. The learned Collector (Appeals) has held that since the chemicals are used in the electroplating purposes the same could not be treated as part of apparatus and likewise the other chemicals used in relation to the Electrolyte bath.

7. We observe that Rule 57A excludes machines, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products, from the purview of MOD VAT Credit. These excluded items which have been identified by name stand defined in the Dictionary and understood in trade parlance as answering to a particular type and covering certain range of goods. The plea of the Appellant-Collector is that on account of the functional role of the subject goods, these can be considered in the nature of tools or apparatus. We observe that the term used in Rule 57A for the purpose of excluding certain items have to be given their natural meaning and no artificial meaning can be attached to these. We observe that MOD VAT Scheme is a beneficent legislation and unless it can be shown that the items in respect of which MOD VAT Credit is being denied are specifically included in the excluded category of items, MOD VAT credit cannot be denied. In the present case as we have stated the Revenue wants the meaning of these terms to stretched wants the Hydrochloric Acid has to be treated as a tool as the functions it performs are likened to that of a tool. This, we are of the view that, is not the intention of the Legislature as no artificial meaning can be assigned to the words used in the Rule 57A, wording used does not admit of such an interpretation. Going by the plain meaning of the items in the excluded category, we hold that the plea of the learned Collector is not maintainable. As it is we observe this Tribunal in the case of Cominco Binani Zinc Ltd v. Collector of Central Excise - reported in MANU/CC/0036/1990 : 1990 (48) ELT 283 and MANU/CC/0073/1990 : 1990 (50) ELT 248 has held that aluminium sheets used in the electrolysis process as also Graphite Anodes are eligible for MODVAT Credit. The observation of the Tribunal in the case reported in MANU/CC/0036/1990 : 1990 (48) ELT 283 is as under :

"It is observed that the term 'input' used under Rule 57 has a wider import. Aluminium sheets used being not equipment as such and since these participate in the manufacturing process, have to be taken to be covered by the provisions of Rule 57A for grant of MODVAT Credit. The Hon'ble Supreme Court in the case of J.K. Cotton Mills Co Ltd v. Sales Officer, reported in MANU/SC/0269/1964 : AIR 1965 SC 1310 (VC 213) examined the scope of the term goods used 'in the manufacture' in the context of Rule 18 framed in the context of Section 13 of the Central Sales Tax Act, 1956 has held as under :

"The goods referred to in Clause (b) of Sub-section (3) of Section 8, which a registered dealer may purchase shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores spare parts, accessories, fuel or lubricants in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power"

In view of the wide amplitude of the words, 'in or in relation' to the manufacture of specified finished product under Rule 57A, it can be said in the light of the judgment of the Hon'ble Supreme Court that Aluminium sheets are used in relation to the manufacture of the goods which are specified products covered by the Notification issued under Rule 57A of the Central Excise Rules. This Tribunal in the case of Graphite Anodes has also held that MODVAT Credit is admissible for the same as inputs."

8. In view of our decision cited supra and taking into consideration the use of these goods as set out in the grounds of appeal, we find no reason to depart from our earlier decision. Therefore, the learned lower authority's order in allowing the benefit of MOD VAT Credit in respect of items in the facts and circumstances of the case, is maintainable in law. The appeal of the Revenue is therefore rejected.