Judgment:
1. This appeal is filed by the Revenue against the findings of the Collector (Appeals) holding that MODVAT Credit is available under Rule 57A in respect of Dissolved Acetylene and Oxygen used for purification of the metal and also for easy melting. The learned lower appellate authority has also allowed the benefit of MODVAT Credit in respect of graphite nipples which have been held by the lower appellate authority to be similar to graphite electrodes classifiable under the same sub-heading i.e. graphite electrodes as declared by the respondents in their declaration.
2. The learned SDR submitted that Oxygen and Acetylene gases are used by the Respondents for cutting scraps. The Collector (Appeals) has taken note of the use of the same for purification of the metals. He pleaded that cutting of the scrap is a process anterior to the process of manufacture and therefore the benefit of MODVAT Credit cannot be allowed for its use at this stage. Further, he pleaded that the Respondents had not declared the Graphite nipples in the declaration filed under Rule 57G of Central Excise Rules by them before the authorities and therefore the Respondents are not eligible to avail the benefit of MODVAT Credit in respect of these inputs.
3. Shri Balasubramanian, the learned Counsel for the Respondents pleaded that so far as Acetylene and Oxygen gases are concerned these are used in relation to the manufacture of the final product by the Respondents in their factory for cutting of the scrap which is a necessary operation for feeding the material into the furnace for melting. As regards Graphite nipples he pleaded that even if the Respondents had not declared the same in the declaration filed, the benefit of MODVAT Credit should be allowed in respect of the same and he cited the judgment of the Tribunal reported in 1993 (65) E.L.T. 289 and 1990 (48) E.L.T. 552 in support of his plea.
4. We observe that admittedly Acetylene and Oxygen gases are used for cutting the scraps before these are fed into the furnace for melting.
The scrap has been declared as an eligible input by the Respondents and to make the scrap ready for being fed into the manufacturing stream cutting has to be carried out as an essential operation preparatory to the manufacturing process and is carried out on the input scrap to make this input ready for use in the manufacturing process. Therefore, the cutting process has to be considered to have been carried out in relation to the manufacture of the final product. In this view of the matter, we hold that Oxygen and Acetylene gases are to be held to be covered by the provisions of Rule 57A and MODVAT Credit has to be allowed in respect of the duty paid on the same.
5. In regard to Graphite nipples, it has been specifically pleaded by the learned Counsel for the Respondents that declaration has not been filed in the MODVAT Declaration form under Rule 57G. Declaration of an input under Rule 57G is a statutory requirement and the assessee's eligibility for taking MODVAT Credit can be there only if the declaration in respect of the same has been filed. Only contingency in which MODVAT Credit can be allowed for inputs before filing the declaration is when the benefit under Rule 57H is claimed for the inputs which are lying in stock on the date of filing of the declaration. No plea in this regard has been taken. The case law cited by the Respondents is of no avail in the facts of this case. Therefore, in the absence of any declaration having been filed in respect of Graphite Nipples, we hold that the lower appellate authority was in error in allowing the benefit of MODVAT Credit to the Respondents. In view of the above, we, partially allow the appeal.