Judgment:
1. By the present appeal, the Commissioner, Indore has assailed the order of Commissioner (Appeals). The Commissioner (Appeals) held: "8. The order does not survive even on merits. Applying the ratio of the cited judgements in the case of Straw Products Ltd. and that of Singh Alloys (cited supra), lancing pipe and foundry fluxes nozzles, have to be considered eligible for Modvat credit as they are not machinery, tool etc. As regards skull scrap, the Dy. Collector has clearly erred in saying that the in voices/delivery challans of the Indian Iron and Steel Co. Ltd. stockyard, Burnpur have not been recognized to be the valid document for the purpose of taking credit. As contended by the appellant, the invoices of the integrated steel plant are acceptable as GP-1 as per Board's letter No. 1/73/70-CX. 6 dated 12-4-1971 under Rule 52A. It is further seen that the combined despatch advices and challan and bills carry a certificate on the reverse that central excise duty has been paid on the goods covered by the invoice. The relevant computerised challans here are found to be issued in the name of the appellants from which also it is apparent that the excise duty paid is indicated. If the Dy. Collector had any doubt, he could have got the same verified from the supplier's end. However, the Dy. Collector has chosen not to do so; the credit taken, therefore, could not be denied for the reason stated in the impugned order." 2. The facts of the case, in brief, are that the respondents herein are engaged in the manufacture of iron and non-alloy steel ingots and stainless steel ingots. They were availing Modvat credit of duty paid on inputs and have filed declaration under Rule 57G of the Central Excise Rules. It was observed by the Central Excise Officers that the respondents had taken credit in December 1990 as they made an entry in RG 23A Part I and Part II though they did not have any central excise licence on that day as the respondents herein took the central excise licence on 7-1-1991. It was also observed by the Central Excise Officers that the respondents herein had taken Modvat credit on steel skull scrap under various challans in which chapter heading/sub-heading has not been mentioned. The Department alleged that Modvat credit taken in the month of December 1990 and Modvat credit taken on the basis of challans where chapter heading or sub-heading were not mentioned was not admissible to the appellants. Therefore, a show cause notice was issued to the respondents herein asking them to explain as to why Modvat credit taken by them should not be disallowed and why the same should not be recovered under Rule 57-1 of the Central Excise Rules.
3. The respondents herein in reply to the show cause notice relied upon the proviso 2 of the Rule 174 of the Central Excise Rules, 1944 and submitted that they had applied for L-4 licence for manufacture of iron and non-alloy steel billets/ingots and stainless steel billets/ingots : that they filed a declaration under Rule 57G: that they received inputs on 26-12-1990 and that they had correctly availed Modvat credit. After considering all the facts, the Dy. Collector disallowed the Modvat credit and asked the respondents to pay the same under Rule 57-1 on the ground that lancing pipe and foundry fluxes nozzles are used for free flowing of oxygen and liquid metal respectively and are thus parts of machinery and credit availed on skull scrap was irregular as the delivery challan of Indian Iron and Steel Co. is not a specified duty-paying document. The Commissioner (Appeals) held that lancing pipe and foundry nozzles have to be considered eligible for Modvat credit as they are not machinery, tool etc. About skull scrap, the learned Commissioner (Appeals) held that invoices of integrated steel plant are acceptable as GP-I as per Board's letter No. 1/73/70-CX. 6, dated 12-4-1971. The Commissioner Appeals) also held that the combined despatch advices and challan and bills carry a certificate on the reverse that central excise duty has been paid on the goods covered by the invoice; that excise duty paid was indicated in the challans.
4. Shri Y.R. Kilaniya, the learned DR appearing for the appellants submitted that the decision in the case of Straw Products Ltd. has not been accepted by the Department and a reference application has been filed before the Hon'ble Orissa High Court; that the decision of M/s.
Singh Alloys has not been accepted by the Department and an appeal has been filed in Calcutta High Court: that lancing pipe has been found to be used for passing oxygen into the molten metal in the furnace for the purpose of purifying the metal; that it was a part of machinery and cannot be treated as an input entitled for Modvat credit. The learned DR submitted that foundry fluxes nozzle is for free flowing of liquid metal from the ladle through the nozzle and thus it was also a part of machinery on which credit is not available, that in the case of Andhra Pradesh Paper Mills Ltd. v. C.C.E. reported in 1990 (50) E.L.T. 252 and Sirpur Paper Mills Ltd. v. C.C.E. reported in 1991 (56) E.L.T. 649 this Tribunal denied Modvat credit on wire netting, dandy covers and woollen felts holding that the items are essential part of paper-making machinery whose main use is to keep the machinery functional. The ld.DR submitted mat the use of lancing pipe and foundry fluxes nozzles are identical to those discussed in the case of Andhra Pradesh Paper Mills and Sirpur Paper Mills. The ld. DR, therefore, submitted that the ratio of the decision of the above two cases covers the present case squarely and prayed that the appeal may be allowed. In support of the above contentions, the ld. DR cited and relied upon the decision of the Tribunal in the case of Andhra Pradesh Paper Mills reported in 1990 (50) E.L.T. 252 and Sirpur Paper Mills reported in 1991 (56) E.L.T.5. None appeared for the respondents. However, as the issue appears to be covered by the decisions of this Tribunal cited supra and of High Court of Calcutta it was decided to proceed with the matter even in the absence of the respondents herein. They cited and relied upon the decision of this Tribunal in the case of Singh Alloys and Steel Ltd. reported in 1993 (66) E.L.T. 594 (Cal.) and in the case of Straw Products Ltd. reported in 1992 (52) E.L.T. 572.
6. Heard the submissions of the learned DR, perused the case-law cited and relied upon. I find that there are two issues involved in the appeal. The issue number one pertains to taking credit before obtaining a licence and the second issue is whether lancing pipe, foundry fluxes nozzle is a part of machinery, equipment and apparatus by themselves.
7. Insofar as the first issue is concerned, we find that though licence was issued on 7-1-1991, however, application for obtaining this licence (L-4) appears to have been submitted much before 26-12-1990 though there is no finding on this aspect. However having regard to the fact that this issue is not agitated in the appeal filed. I presume that the application for a licence was filed before 26-12-1990. In terms of proviso 2 to Rule 174(3), the respondent was entitled to take credit on 26-12-1990 and I hold accordingly.
8. On the second issue, I find that the Hon'ble Calcutta High Court had gone into this question in extensio. For the sake of convenience paras 20,21,22, 23 and 24 are reproduced : "20. Furthermore if there were any doubt, I hold that appliance must be read ejusdem generis with the preceding words. The words preceding constitute a specific category or a distinct genus and if there were any doubt, as to the meaning of the word of appliance, which in my view there is no, the same must be construed with reference to that genus or category. The preceding words have been defined in Mc-Graw Hills dictionary as follows :'Apparatus A compound instrument designed to carry out a specific function.Appliance A piece of equipment that draws electric or other energy and produce a desired work-saving or other result. Such as an electric heater, radio or an electronic range. EquipmentMachine A machinery, electric, or electronic device, such as a computer, tabulator, sorter or collator.Machinery A group of parts or machines arranged to perform a useful function.Plant The land, buildings and equipment used in an industry.Tool Any device, instrument or machine for the performance of an operation, for example, hammer, saw, lathe, twist drill, drill press, grinder, planner, or screw driver. To equip a factory or industry for production by designing, making and integrating machines, machine tools, and special dies, Jigs, and instruments, so as to achieve manufacture and assembly of products on a volume basis at minimum cost.' 21. None of these definitions would include items like chemicals such as the items in question. It may be noted that as far as the Tariff Act of 1985 is concerned, Plant, Machinery, Machines, Equipment, Apparatus, Tools and Appliances are all classified under Headings and Sections which are totally different from the Headings and Sections under which the items are classified.
22. The Tribunal has erred in seeking to limit the meaning of the word 'inputs' to those items which go into the steel ingot completely overlooking the phrase 'in relation to' in the definition in the major clause of the explanation.
23. The respondents then argued that steel ingots could be manufactured even without the items. That may be so, but that is immaterial. The definition of inputs is not dependent upon what ought to be used but what is in fact used. There is no dispute that the petitioner No. 1 had in fact, used and uses the items in the manufacturing of ingots. The Supreme Court has also held that manufacture would include a process which was commercially expedient in the production of goods [see : Collector of Central Excise v. Eastend Paper Industries - 1989 (4) SCC 244 : Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works : AIR 1991 SCC 2222]. That the process in question is commercially expedient has not been doubted.
24. For the reasons aforesaid the impugned order of the Asstt.
Collector cannot be sustained and is accordingly quashed. The Bank guarantee furnished by the petitioner in respect of the demand made under the impugned order is discharged. The claim of the petitioner for refund of any payment made pursuant to the interim order dated 10-4-1991 may be obtained by the petitioners under Section 11B of the Act from the respondent authorities subject to the provisions of that section and in accordance with law. Such application must be disposed of within a period of eight weeks from the date of the communication of the order." 9. Having regard to the above ruling of the Hon'ble Calcutta High Court, I hold that Modvat credit shall be admissible to the respondents lancing pipe and foundry fluxes nozzles.
10. In the result, the impugned order is upheld and the appeal is rejected.