ORDER

K. Sankararaman, Member (T)

1. M/s. Associated Cement Companies have filed this appeal against the order in appeal dated 10-06-1988 passed by the Collector of Central Excise (Appeals), Calcutta, rejecting their appeal in respect of various items claiming benefit of modvat credit as inputs used in or in relation to the manufacture of cement. He allowed the appeal only in respect of grinding media.

2. Shri R.M. Das, learned consultant, argued their case when the appeal came up for hearing. He strongly contended that the goods are definitely eligible for the mod-vat benefit as they satisfy the criteria laid down in Rule 57A being goods used in or in relation to the manufacture of cement. The expression "used in relation to the manufacture" is very wide and would cover the goods in question. He referred to the detailed submissions in the appeal and pleaded that the appeal may be allowed.

3. The arguments were resisted strongly by Sri M.N. Biswas, learned SDR. He supported the order of the Collector (Appeals) which he said correctly reflected the legal position. He pleaded that the appeal may be rejected. The goods for which modvat credit has been claimed, chapter number under which they fall and the manner of use have been furnished by the appellants in the appeal. These are shown in the annexure to this order. The Collector (Appeals) has observed in his order that modvat credit has been claimed on some of the products like even tyres, tubes, iron and steel angle, channels used for general structural and maintenance purposes, railway construction materials, parts and accessories of motor vehicles for example certain items are required for maintenance purpose. He has concluded that such items can, by no stretch of imagination, be considered as inputs used in or in relation to the manufacture of cement. It is this finding which is under challenge in the present appeal.

4. In their appeal memorandum the appellants have referred to the judgment of the Hon'ble Supreme Court in J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer, 1985 (16) STC 563 and MANU/SC/0269/1964 : AIR 1965 SC 1310, wherein it was held that the expression used in the manufacture of goods should normally encompass the entire 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 "in the manufacture of goods". The expression used in or in relation to the manufacture of the final product further widens the scope of the input for which credit of duty is permitted. The rule excludes only machine, machinery, plant equipment parts, tools or appliances used for producing the goods. Reliance has also been placed on certain decisions of Cegat on input relief. In MANU/CE/0270/1985 : 1986 (25) ELT 297 (Tribunal), it was held by the Tribunal that inputs are used directly or indirectly in the manufacture of finished products. Hence even inputs used in the manufacture of intermediate products which alone went into the manufacture of the final products were held to be entitled to exemption. There is nothing in the Modvat Rules militating against this interpretation. Again in MANU/CE/0122/1985 : 1985 (21) ELT 901 (Tribunal), the Tribunal held that direct utilisation is not necessary for the substance to be called an input. In the circumstances the appellants submit that the items mentioned in the list are entitled to Modvat benefit. They have added in conclusion that items like (i) diesel oil used for quarrying of limestone, raw material for cement (ii) explosives used as direct input in blasting of limestone (iii) refractory bricks used in kilns for manufacture of intermediate stage of cement (iv) castings of iron steel used as lining plates in cement mills. Raw Mills and Ball Mills are all consumable items and are essential items for manufacture of cement. They contend that Modvat Credit is unassailable and the order in appeal is liable to be quashed/set aside.

5. We have considered the submissions made by both the sides. First, we take up for examination the application to this case of the judgment of the Supreme Court in J.K. Cotton Spinning Weaving Mills Co. Ltd., cited by the appellants. That judgment was rendered in the context of Central Sales Tax. Section 13 of the said Act conferred power upon the Government to make rules for inter alia enumerating goods used in the manufacture or in mining or in the generation or distribution of power. Accordingly, Rule 13 was passed in terms of which the goods eligible for the benefit admissible under the provisions were those intended for use as raw material, processing materials, machinery plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants in the manufacture of processing of goods for sale or in mining or in generation or distribution of power. The scope of the relevant provisions for the purpose of the Central Sales Tax were wider in scope than the provisions relating to availment of Modvat credit. Thus, even machinery and equipment would be covered for the benefit available under the Central Sales Tax whereas they stand specifically excluded in the Modvat Scheme. The appellants have in this pointed out that what are specifically excluded from Modvat benefit are machinery, equipment etc. and the subject goods are consumables. While this contention is correct, it is necessary to realise that such a specific exclusion has been incorporated in the definition of inputs only to exclude such machinery equipment etc. as are used in or in relation to the manufacture of the finished products. Where the materials or goods used are not in or in relation to the manufacture of the finished products, they will not qualify for Modvat even if they do not belong to the excluded type of goods like machinery equipment etc., but are only consumables. Such consumables should be used in or in relation to the manufacture of the finished products. Applying that criterion it is not possible to agree with the claim made by the appellants for the reasons being discussed in the paragraphs below.

6. Apart from the J.K. Cotton Spinning Weaving Mills Co. Ltd. case decided by the Supreme Court, the appellants have cited two cases decided by the Tribunal reported vide MANU/CE/0122/1985 : 1985 (21) ELT 901 (Tribunal) : MANU/CE/0270/1985 : 1986 (25) ELT 297 (Tribunal). In these appeals the Tribunal had held that inputs are materials used indirectly or directly in the manufacture of finished products and hence inputs used for the production of an intermediate product which alone went into the manufacture of the final product were entitled for exemptions under Notification No. 201/79. The Supreme Court also in Collector of Central Excise v. Ballarpur Industries Limited, MANU/SC/0115/1989 : 1989 (43) ELT 804 (S.C.), rejected the contention that as the process in which sodium sulphate was used was anterior to or at one stage removed from the actual manufacture of paper the use of sodium sulphate in the production of pulp would not amount to use in the manufacture of paper. They held that such an approach would seek to attempt to dissect an otherwise integrated process of manufacture of paper. They referred to the utilisation of the goods in question in the manufacturing process as distinct from the manufacturing apparatus.

7. Applying the ratio of the above judgment and decisions, we find that the use of the different goods listed by the appellants is for quarrying of limestone, plant repair, industrial structures, maintenance, kiln lining, transportation, roofing of factory structures, hand gloves and shoes for safety. Laboratory glassware for laboratory use... locomotive spares etc. Cement itself is being claimed the benefit for internal use. What can be permitted for Modvat benefit under Rule 57A of the Central Excise Rules are goods used in or in relation to manufacture subject to exclusions like machinery etc. Goods required for maintenance of structures, equipment and machinery are not eligible inputs. They are used in relation to maintenance and repair of the machinery, equipment and not used in relation to the manufacture of the final products. Goods used for mining of limestone or maintenance of mining machinery or equipment or for transport are likewise ineligible for the benefit of Modvat credit. The order in appeal does not disclose any infirmity in regard to the denial of Modvat credit on such goods. We accordingly reject the appeal. The operative part of the order was announced in the court when the appeal was heard on 17-04-1990.