ORDER

V.P. Gulati, Member (T)

1. This is an appeal against the order of the Collector of Central Excise (Appeals), Madras, dated 13-4-1989. Brief facts of the case are that the appellants claimed the benefit of MODVAT credit in respect of coated Titanium Anodes falling under Tariff sub-heading 8108.00 utilised in the manufacturing process of caustic soda. The Anodes are used in the electrolysis process leading to the production of caustic soda. The claim was rejected by the lower authorities.

2. The learned Advocate for the appellants pleaded that the matter was covered by the ruling of the West Regional Bench of the Tribunal vide their order in the case of Gujarat Alkalies & Chemicals Ltd. v. Collector of C.Ex., reported in MANU/CM/0039/1989 : 1989 (41) ELT 424 (Tribunal), wherein the Tribunal has held that Titanium Metal Anodes were eligible for the benefit of MODVAT credit and drew our attention to the findings of the Tribunal set out in para 8 of the order, which for convenience of reference are reproduced below:

"Anodes are necessary in the electrolysis process for the manufacture of caustic soda lye. These anodes can be of Graphite or Titanium Coated Metal Anodes, which is reported to be a better substitute. The difference is that in the case of Graphite Anodes they get consumed quickly in the process and need frequent replacement in a span of three to six months. In the case of Titanium Metal Anodes the noble metal portion gets consumed in the process and they are coated periodically but in any case, even the recoating can be done only twice or thrice and not beyond that. In any case, there is no dispute that it is essentially required in the manufacture of caustic soda lye and also in that view it is used in relation to the manufacture of caustic soda lye. The question whether some part gets consumed or can be permanent becomes relevant only for interpreting whether they come under the excluded category. There is no mention in the rule that only that item which gets consumed in the process can be called as inputs. The excluded category are machines, machinery, plants, equipments, apparatus, tools or appliances. We are unable to appreciate that Anodes come under any of these items in the excluded category."

He also cited the decision of the Special Bench of the Tribunal in the case of Collector of Central Excise, Indore v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd., reported in MANU/CE/0070/1988 : 1988 (35) ELT 227 (Tribunal), in the context of Notification 201/79-CE wherein it has been held that the Titanium Substrate Insoluble Anodes are eligible for taking the input duty credit when used for the manufacture of caustic soda. He also cited the order of this Bench in Order No. 16/1990 dated 2-1-1990 in appeal No. E/486/88/MAS by Cominco Binani Zinc Ltd., wherein in the case of Aluminium sheets which are used in the electrolysis process the benefit of MODVAT credit has been allowed.

3. The learned Senior D.R. for the Department pleaded that the Special Bench decision given in the context of Notification 201/79-CE was not relevant as there were no excluded items specified in Notification 201/79 as against specified items which stand excluded from the scope of the benefit of MODVAT credit. He pleaded that unless the inputs used directly take part in the formation of the end-product the benefit of MOD-VAT Scheme was not available for such items. He also pointed out that the Revenue had filed a Reference Application against the decision of the West Regional Bench in the case of Titanium Metal Anodes and filed a copy thereof.

4. We observe that in view of the decision of this Bench in the case of Aluminium sheets and that of the West Regional Bench in the case of Titanium Metal Anodes and also the decision of the Special Bench of the Tribunal in the context of Notification 201/79, the appellants' appeal will have to be allowed. It is observed that the Hon'ble Supreme Court in a recent judgment in the case of C.C.E v. Eastern Paper Industries [MANU/SC/0107/1989 : 1989 (43) ELT 201 (SC)] has held as under:

"...Where any particular process, this Court further emphasised, is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression 'in the manufacture of goods'...."

It is observed that the wider meaning is desired to be given to the expression 'used in or in relation to the manufacture' of goods in the context of Rule 57A and in that view of the matter, as held in the decision cited above, we find no reason to depart from the earlier decisions of the Tribunal. We like to stress that this Bench in the case of Cominco Binani Zinc Ltd. v. Collector of C. Ex., Cochin, in Order No. 16/1990 dated 2-1-1990, referred to supra, have held as under:

"It is observed that the term 'inputs' used under Rule 57A 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 Tax Officer, reported in MANU/SC/0269/1964 : AIR 1965 SC 1310 (V C 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".

In view of the above, the appeal is allowed.