1. M/s. Indian Rayon and Industries Ltd. have filed this appeal against the order of Collector, Central Excise, (Appeals). The Collector, Central Excise (Appeals) in his order had held that :- "I have carefully examined the appellant's contentions. In regard to the explosives, the appellant's contention is that the same are being used in or in relation to the manufacture of their final product i.e White Cement. The fact is that these explosives are used for mining of limestone. The adjudicating officer has held that the impugned inputs are not used as such individually but are arranged in a particular manner and sequence to act as a whole set for the purpose of blasting the mines, and the same are of the nature of the equipment and in-eligible to Modvat credit as held by the Tribunal in case of M/s. ACC Ltd. reported in 1990 (50) E.L.T. 295. On this point, I observe that the Tribunal has held that items to be used as consumer goods such as those for mining limestone are not inputs for cement. Therefore, the appellant's arguments on this point do not hold good. Further, it is a fact that mining area is not a part of the factory where the manufacture of the cement takes place, and, therefore the activities in the mining area are not necessarily the activities relating to the manufacture of cement in the appellant's factory far away from the mining area. All blasts in the mining area would not lead to the manufacture of final product, cement and the use of the inputs in the said blast therefore cannot be said to lead to the manufacture of the final product, cement. In regard to the explosives therefore, I do not find any merits in the appellant's contentions warranting any interference with the reasoning of the adjudicating officer.
In regard to the grinding media balls, I observe that the adjudicating officer has held the same are tools. The appellant's argument during the adjudication proceedings was that the grinding media balls are consumables and not commonly understood as tools. On this point, further to the reasoning of the adjudicating officer, I find that the fact is that all tools are consumable. Some are in the long term and some are in the longer term and therefore the appellant's argument is clearly beside the point. The fact is that the tools are excluded by the explanation clause to Rule 57A and, therefore, whether tools are used as consumable or not, are excluded therefrom.
In view of the above, I, therefore, uphold the adjudication order in this case and reject the appeal." 2. Briefly stated the facts of the case are that M/s. Indian Rayon Industries Ltd. are manufacturers of cement. They filed a Modvat declaration under Rule 57G of the Central Excise Rules, 1944 wherein they declared various explosives and grinding balls of Iron and Steel as inputs used in or in relation to the manufacture of cement. The appellant have been allotted mining rights for mining of limestone. The appellant used explosives like safety fuses, detonating fuses, percussion or detonating caps, Ignitors, electric detonators. The appellant also uses grinding balls of Iron and Steel in grinding mills for crushing and powdering of the stone used for the manufacture of the cement.
3. Shri R. Swaminathan, the ld. Advocate appearing for the appellant submitted that explosives and grinding media (Steel Balls) are used in relation to the manufacture of cement; that the Hon'ble Supreme Court in the case of CCE v. Ballarpur Industries, reported in 1989 (43) E.L.T. 804 had held that :- "We also find no substance in the contention of Sri Ganguly that the process in which Sodium Sulphate was used, was anterior to and at one stage removed from the actual manufacture of paper. Sri.
Sorabjee's answer to this contention is, in our view, appropriate.
That part the following observations in Collector of Central Excise v. Eastend Paper Industries Ltd. cited by Sri Ganguly himself is a complete answer: (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.) The Hon'ble Supreme Court further held that :- Now the word about Sri Ganguly's insistence on drawing a line of strict demarcation between what can be said to be goods merely used in the manufacture of what constitute goods used as 'Raw Material' for the purpose. We are afraid in the infinite variety of ways in which these problems present themselves it is neither necessary nor wise to enunciate principles of any general validity intended to cover all cases. The matter must rest upon the facts of each case. Though in many cases it might be difficult to draw a line of demarcation, it is easy to discern on which side of the borderline a particular case falls." The ld. Counsel for the appellant submitted that the mines are taken on lease by the appellant and limestone is quarried by use of explosives, thus the process of mining is very integrally connected with the entire process of manufacture of cement and, therefore, explosives as well as grinding media should be considered as inputs by following the ratio of the decision of the Apex Court cited supra. The ld. Counsel also submitted that in so far as explosives are concerned their case is fully covered by the ratio of the decision of the Tribunal in the case of Associated Cement Co. Ltd., reported in 1991 (55) E.L.T. 415 and in regard to grinding media balls their case was covered by the decision of the Tribunal in their Final Order No. A/805/93-NRB, dated 1-10-1993 in the case of M/s. Sri Ram Cement Works v. CCE, Jaipur. The ld.Counsel on being asked whether the decision of the Tribunal reported in Collector v. J.K. Synthetics Ltd. 1993 (68) E.L.T. 827 on the question of classification of Steel Balls being classified under 84.56 has altered the ratio of the decision in the case of Sri Ram Cement Works.
The ld. Counsel for the appellant submitted that the decision reported in 1993 (68) E.L.T. 827 is based on the classification practice pertaining to the period prior to 1983; that after 1-3-1988 when Central Excise classification has been aligned with HSN grinding balls and similar articles for mills are classifiable under 7326.11. The ld.Counsel therefore argued that in this view of the matter the ratio of the decision of the Tribunal in the case of Sri Ram Cement Works will be squarely applicable in their case.
4. Shri B.D. Bhagat, the ld. JDR submitted that explosives and grinding media cannot be considered as inputs even if the case law cited and relied upon by the appellant is examined at length. Reiterating the findings of the lower authorities, the ld. JDR submitted that the lower authorities have rightly held that explosives and grinding balls are not inputs used in or in relation to manufacture of cement.
5. Heard the submissions of both sides and considered them. Reliance has been placed on the two decisions of the Tribunal as also the decisions of the Supreme Court in the case of CCE v. Ballarpur Industries Ltd.Indian Copper Corpn. Ltd. v. Commissioner of Commercial Tax, Bihar and Ors.. Some of these decisions have been referred to by the Tribunal while examining the case of M/s. Associates Cement Co. The relevant portion of the decision of the Tribunal reported in 1991 (55) E.L.T. 415 [Paras 10,11 & 12] is reproduced below:- Thus, it would be seen that the Tribunal had held that explosives are inputs used in or in relation to the manufacture of cement. I agree with this decision of the Tribunal. Grinding Balls issue was examined by the Tribunal in the case of Sri Ram Cement Works v. CCE, Jaipur. The Tribunal had held that :- "Now examining whether grinding media is a component of plant and machinery, as held by the ld. A.C. or tool and tool bits, as held by the Collector of Central Excise (Appeals), in the light of various decisions cited by both sides, I find that the Hon'ble Supreme Court in the case of J.K. Cotton, Spg. & Wvg. Mills and Eastend Paper Industries laid down that if the process is so integrally connected with the ultimate production of goods that it would be commercially inexpedient to produce the finished goods without that process all such inputs would get the benefit of credit of duty. No evidence has been brought on record that there was any other process or the use of grinding media was not an integral part of the entire process of manufacture of the cement. In the light of the above finding and the decisions of various judicial bodies, I respectfully agree with the test laid down by the Apex Court and hold that the credit of Modvat on grinding media will be available to the appellants." I also find that tools are normally attached to machines, but the steel balls are not attached as such and therefore do not fall in the category of tools. Having regard to the findings of the Tribunal, I agree that Modvat credit will be available on grinding media also.
6. In terms of the above findings, the appeal succeeds and the impugned order is accordingly set aside. Consequential relief if any shall be admissible to the appellant in accordance with law.