Judgment:
1. The Single issue for consideration here is whether lubricant oils and greases which are used for the maintenance of machinery qualify as inputs for the purpose of Modvat Credit in the manufacture of sugar and molasses.
2. Shri Rajesh Kumar, ld. Advocate, argued that the language of Rule 57A covers those inputs which are not only used in the manufacture but also those which are used in relation to the manufacture. The optimum utilisation of machinery is not possible without using lubricants and greases and in this way such lubricants and greases are used in relation to manufacture of sugar. He stated that judgment rendered in the case of Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise - 1990 (50) E.L.T. 252 (Tribunal), the expression "in relation" has been analysed. It was held that any inputs used in processes which are preparatory in nature and anterior to the start of the manufacturing stream also contribute to the production and any materials used in such anterior processes would also qualify as inputs.
Referring to the judgment of the Apex Court in the case of Collector of Central Excise v. Rajasthan State Chemical Works - 1991 (55) E.L.T. 444 (SC), he stated that manufacture involves a series of processes and the materials used in any of the processing, however, remote it is from the final process amount to manufacture is also a process in relation to manufacture. He stated that the explanation given in Rule did not cover the lubricants etc. He pleaded that full effect should be given to the intention of the legislature. Citing in support the judgment of the Apex Court in the case of Swadeshi Polytex Ltd. v. Collector of Central Excise - 1989 (44) E.L.T. 794 (SC), he stated that the earlier judgment of the Tribunal in the case of Gujarat Alkalies & Chemicals Ltd. v.Collector of Central Excise, Vadodara - 1996 (12) RLT 356 had. held Freon and Mefron Gas used in the refrigeration plant are eligible inputs. The same was the case of anti-freezing agents used in chilling plants. He further submitted that stropping paste and tricholori ethyal vised in the manufacture of blades were also held as permissible inputs. On this count he pleaded for setting aside the lower orders.
3. Shri S.N. Ojha, ld. JDR argued that the basic point was to see whether the alleged inputs were essential for the manufacture of the impugned goods or not.
4., I have carefully gone through the arguments advanced by both the sides.
5. Rule 57A does not define inputs. It makes certain deeming provisions by way of clauses (c) & (d) of the Explanation thereto. It also lists certain exclusions. Ld. Advocate is correct in stating that lubricants and greases used for smooth operation of the machinery is not in the exclusion category. But his claims that the goods which ensure optimum utilisation of the machinery, should be given the status of inputs used in relation to the manufacture of the final goods, needs examination.
6. Several Benches of the Tribunal and the Courts have gone into the aspect whether a particular input qualifies under Rule 57A or not.
However, a general rule has not been so far laid down. The officers had initially disallowed the Credit on the goods which were not visible in the end-product. Sodium resonate used in the manufacture of paper was one such example. Initially also credit was denied on those inputs which got lost during the process. The position emerging so far has drawn a line within which the admissibility is defined and that line is as long as the products are essential for the manufacture of a certain final product they are admissible whether they are directly used, indirectly used, and regardless of whether they are visible, invisible or lost in the process. Such a line is required to be drawn otherwise there will be no barrier prohibiting any inputs. The manufacturing area is lighted by electric lamps. Without illumination no production can take place, But that Would not enable a manufacturer to ask for Modvat Credit on the electric lighting bulbs. All the examples cited by the ld. Advocate such as [freon] gas anti-freeze agents etc. are essential for the very creation of the final goods. Any inputs merely making for better operation of the machinery are necessarily to remain outside this line drawn.
7. The arguments that the admissibility of felt cloth and wire knitting used in paper making was admitted on the same grounds, I observe that a distinction was made between machinery which is specifically excluded and parts thereof which were not specifically excluded in dealing with the admissibility of the goods. That logic does not apply to the goods before us.
8. I hold that lubricants and greases are not eligible inputs in terms of Rule 57A. I uphold the lower order and reject this appeal.