Judgment:
1. This is an appeal at the instance of the Revenue. They challenge the Order-in-Appeal No. 36-CE/KNP-I/99, dated 26-3-1999. By the said order the assessee's appeal claiming Modvat credit on Steel Shots used in the manufacture of finished product was allowed. According to the Department credit on Steel Shots used in the manufacture of C.I.Castings is only admissible under Rule 57A of the Rules and not under Rule 57Q as observed by the Commissioner. Since Modvat credit has now been allowed under Rule 57Q/ the Revenue wants the order of the appellate authority reversed.
2. Demand-cum-show cause notice dated 22-3-1996 was issued to the manufacturer alleging :- "The assessee submitted a Modvat declaration dated 26-9-95 under Rule 57T(1) for availing Modvat credit on capital goods, under Rule 57Q of Central Excise Rules, 1944 on input (Steel Shots 7205.20) used in the manufacture of their final product (cast articles of iron). The assessee was asked by the Superintendent of Central Excise Range-II, Agra vide his letter C No. Ch./Bharat/R 11/94/1216, dated 8-11-1995 to intimate the use of 'Steel Shots' used in the manufacture of cast articles of iron. Till date no reply has been received which shows that the use of 'Steel Shots' is not in or in relation to the completion of manufactured products, but is otherwise".
3. In reply to the show cause notice the assessee filed detailed objection. Their contention on the use of Steel Shots as could be seen from the order passed by the adjudicating authority is as follows: "Steel Shots are small/tiny balls used in "shots blasting machine".
This machine removes Mud, Sand and other foreign particles from the moulded items. "Steel Shots" are thrown on moulded items inside the machine with the help of Air Pressure by shot blasting machine and as such frequent strikes of "Steel Shots" removes foreign particles from the moulded items. Without shot blasting process, products are incomplete and are not marketable." Adjudicating authority took the view that Steel Shots are used in or in relation to the manufacture of final product does not mean that Steel Shots are capital goods under the definition of capital goods under Explanation to Rule 57Q and, therefore, they wrongly availed Modvat credit of Rs. 15,000. Credit so availed, was reversed and penalty of Rs. 5000 was imposed. On appeal, the Commissioner (Appeals) took the view that the contention of the appellant that Modvat credit are available on eligible capital goods, irrespective of the fact whether they are capital goods or not, is correct. Accordingly, he held that Steel Shots are eligible capital goods under Rule 57Q and are entitled to Modvat credit.
4. Learned Departmental Representative reiterated the grounds mentioned in the appeal.
5. Nowhere in the Memo, of Appeal it is contended that the steel shots were not used in or in relation to the manufacture of the final product. The only contention is that Modvat credit of duty paid on steel shots are permissible under Rule 57A of the Central Excise Rules, and not under 57Q. Since it is not disputed that steel shots are, in fact, used in or in relation to the manufacture of the final product, the Department cannot claim any relief in this appeal. The order passed by the appellate authority is confirmed and the appeal is dismissed.