1. The Commissioner in the impugned order which is the Order-in-Original had held that kiln and furnace is essentially a plant or equipment used for the manufacture of final products of iron or steel by bringing about a change in the raw material. The appellants contended that the lining materials in question which are essential for the manufacture and are used as components/accessories for the efficient functioning of the kilns/furnaces, are to be extended the benefit of Modvat credit in view of the explanation l(b) under Rule 57Q. On this contention, the Commissioner held that the Modvat credit has been taken on refractories prior to 16-3-1995 when these were not specified as capital goods under Rule 57Q(1). The Commissioner further held that these are used in kilns-lining purpose only. He disallowed the Modvat credit amounting to Rs. 10,37,606/-.
2. The facts of the case are that the appellants are engaged in the manufacture of iron and steel products. For heating sheets, arc furnace is used. Arc furnace is lined with the refractories. A dispute arose whether the refractories used for lining arc furnace is eligible for the Modvat credit or not. The department alleged that before 16-3-1995, refractories as lining material for arc furnace were not eligible to Modvat credit as capital goods under Rule 57Q(1), therefore, they denied the Modvat credit to the appellants. Against this order, the appellants have filed the present appeal before the Tribunal.
3. Shri G. Shiv Das, learned Advocate appearing for the appellants submits that insofar as the period 16-3-1995 is concerned, there are a number of decisions of this Tribunal holding that specifications of a product on 16-3-1995 was clarificatory in nature. In support of his contention, he cites and relies upon the following judgments :CCE v. Nav Bharat Paper Mills (iii) Valley Abrasives Ltd. v. CCE, Jamshedpur - 1997 (91) E.L.T. 700 (Tribunal).
(iv) J.K. Synthetics v. CCE - 1996 (88) E.L.T. 785. (v) Synthetics and Chemicals v. CCE - 1997 (89) E.L.T. 793. (vi) CCE v. R.K. Marbles Limited - 1997 (92) E.L.T. 276.Shri Ramakrishna Steel Industries Ltd. v. CCE, Madras - 1996 (82) E.L.T. 575.
4. Alternatively, the learned Counsel submits that in case the product in question was not covered by Rule 57Q then it was fully covered by Rule 57A and the product on which the Modvat credit has been denied is part of the furnace; that furnace is a machinery or a plant. He submits that the exclusion clause under Rule 57A covers only machines, machinery, plant, equipment, apparatus, tools, or appliances etc. and not parts or spares thereof. He submits that since parts and spares of the articles included in exclusion clause are not covered, therefore they are inputs for the purpose of Rule 57A. In support of this contention, he cites and relies upon the decision of this Tribunal in the case of Union Carbide India Limited 1996 (86) E.L.T. 613 and in the case of Ramakrishna Steel Industries Limited 1996 (82) E.L.T. 575. He submits that the goods were declared in the declaration filed under Rule 57G as well as in the declaration filed under Rule 57T. He submits that from whichever way the products are looked at they are modvatable.
He, therefore, prays that the Modvat credit may be allowed and the appeal may be accepted.
5. Shri P.K. Jain, learned SDR appearing for the department submits that insofar as retrospective application of the amendment dated 16-3-1995 is concerned, he reiterates the findings of the lower authorities. He, however, submits that since refractories were included specifically with effect from 16-3-1995, the Modvat credit should be eligible to these refractories only from 16-3-1995. He submits that the admitted position is that the Modvat credit has been claimed on refractories prior to 16-3-1995 and, therefore, it should not be allowed and that the lower authorities have rightly denied the Modvat credit on refractories before 16-3-1995.
6. Heard the submissions of both sides. The admitted position is that refractories are lining material for furnace whether arc furnace or induction furnace. The moot point for determination is whether they can be covered for the Modvat credit under Rule 57A as inputs or under Rule 57Q as capital goods. We note that the Tribunal in the judgments of the Larger Bench in the case of Union Carbide India Limited and Ramakrishna Steel Industries Limited had examined the issue in terms of explanation provided under Rule 57A and had held that the spares and parts of the items mentioned in the exclusion clause are not covered by the exclusion clause and, therefore, were eligible to Modvat credit as inputs under Rule 57A. We also note that the Tribunal had in a number of cases cited by the appellants held that the amendment brought about by the Government of India on 16-3-1995 was in the nature of clarification and was applicable retrospectively. The only difference is that whereas the refractories were being treated as inputs prior to 16-3-1995, in view of the fact that they were not specifically covered by the exclusion clause under Rule 57A, they are now specifically covered by the exclusion clause under Rule 57Q. Since the refractories both prior to 16-3-1995 or on after 16-3-1995 are modvatable in accordance with the decisions cited and relied upon by the appellants, we hold that the Modvat credit was admissible on refractories even prior to 16-3-1995. In the circumstances, we allow the appeal with consequential relief, if any, in accordance with law.