Judgment:
1. This reference application arises from Final Order No. A/820-21 /96/NB dated 15-3-1996 passed by the Tribunal. The Tribunal has disposed of two appeals by common order and hence the appellants have filed a single reference application against the common order. The appellants are manufacturers of "Synthetic Rubber". They claimed Modvat credit in respect of two imported inputs namely "Hegatreat and Hegafilm". The department had noticed that admittedly these two items were not used as input in the manufacture of synthetic rubber but they were used as a corrosion inhibitor in all the process plant and in various condensors for maintaining the temperature of polymixisation reaction. Therefore, the department held that these two items cannot be considered as inputs within the scope of the said term as per explanation to Rule 57A of Central Excise Rules. The Tribunal after careful consideration of the submissions and after examining the material on record and noticing the uses to which these two items were employed, held in para 10 of the final order as follows : "10. As can be seen from the above write up both the items are utilised as a corrosion inhibitor in cooling water system and in steam generation system. It is also an admitted fact that these inputs help in prevention of corrosion of the machinery. They are not used in the manufacture of the synthetic rubber as an ingredients or as an input. Therefore, the finding arrived at by the ld. Collector had both the items are not used "in or in relation for the manufacture of the final product" is sustainable and requires to be confirmed. As regards the citations referred to by the Ld.
Advocate it is seen that the inputs which has been discussed in those citations are being utilised directly "in or in relation to the manufacture of the final product". In the present case, the items do not help in the generation of the steam nor in the maintaining of the temperature of the steam but they are used as a corrosion inhibitor. Therefore, on the basis on the appellants' literature itself it is seen that these two items are not utilised, "in or in relation to the manufacture of the final product namely, Synthetic Rubber"." In this reference application, the appellants have contended that the following questions arises for reference to High Court.
"(a) What is the meaning, scope and ambit of the term 'input' as given in the Explanation to Rule 57A of the Central Excise Rules, 1944.
(b) What is the meaning, scope and ambit of the term 'in relation to the manufacture of; (c) Whether the two items namely Hegatreat & Hegafilm in relation of the manufacturing process their technological necessity employed by the applicants in their factory can be held to have been used 'in relation to the manufacture of their final product'." It is stated that the use of these inputs in relation to manufacture of final product was not only essential but a technological necessity, as both the steam and cooled water after their treatment with these inputs were used in the manufacture of final product in the same factory. It is stated that Rule 57A specifically lays down that Modvat credit may be availed on the inputs used in or in relation to the manufacture of final products. The use of the words "in relation to" the manufacture is significant. In effect, it is stated that the term input will not "have a restricted meaning to cover only raw materials used directly in the manufacture of final products but a wider meaning is envisaged so as to include all items whether used in the manufacture of a final product or used in relation to the manufacture of that product. In this context, the appellants are relying on the Supreme Court's judgment rendered in the case of Collector of Central Excise v. Ballarpur Industries Ltd. as reported in 1989 (43) E.L.T. 804, which lays down the principle of set off of duty in respect of the inputs used in the integrated process of manufacture to be treated as 'raw material' having been used in the end product. Reference is also made to the judgment of the Hon'ble Supreme Court rendered in the case of Collector of Central Excise v. Eastend Paper Industries Ltd. as reported in 1989 (43) E.L.T. 201. Reference to the following judgments were also made:Associated Cement Co. v. Collector of Central Excise - 1991 (55) E.L.T. 415 (Tribunal)Straw Products Ltd. v. Collector of Central Excise - 1992 (59) E.L.T. 572 (iii) Kapran Ltd. v. Collector of Central Excise - 1993 (67) E.L.T. 377Collector of Central Excise v. Asian Cables Ltd. -1996 (81) E.L.T. 509.
2. Arguing for the appellants, the ld. Advocate submitted that where there is a conflict between the two judgments of the Tribunal then a question of law arises requiring reference to the High Court. It is also his contention that the items used are essential as a technological necessity for the manufacture of final product and hence non-grant of Modvat would be questions of law requiring reference to the High Court. It is also his contention that the items used are essential as a technological necessity for the manufacture of final product and hence non-grant of Modvat would be a questions of law requiring reference to the High Court. He also referred to the judgment rendered in the case of Shri Ramakrishna Steel Industries Ltd. v.Collector of Central Excise, Madras as reported in 1996 (82) E.L.T. 575 wherein sand moulds were granted to the benefit of Modvat even though sand moulds were not utilised as an input in the manufacture of final product. He referred to the judgment rendered in the case of Equipment Sales Corporation v. Collector of Customs, Madras as reported in 1996 (83) E.L.T. 125, wherein it has been held that the divergent views rendered by the Tribunal would be a case for reference to the High Court. He also referred to the judgment rendered in the case of J.K.Synthetics v. Collector of Central Excise, Jaipur as reported in 1996 (84) E.L.T. 203 (Tribunal) wherein it has been held that a chemical used for filtering the machinery then such an input should be granted to the benefit of Modvat.
3. Ld. DR pointed out from the order of the Tribunal that both the items were utilised only as a corrosion inhibitor, which is in the nature of lubricant to prevent corrosion of the machinery. The item could be considered as an input for maintenance of a machinery. It does not go into the manufacture of the final product for the manufacture of steam which is used during the manufacture of synthetic rubber.
Therefore, he pointed out that there is no question of law arising in the application for reference to the High Court. He also pointed out that the judgment of the Tribunal was based on the facts and hence question of facts are not referable to the High Court.
4. We have carefully considered the submissions made by both the sides and have perused the record. The question that arises for consideration is as to whether the appellants have made out a case for reference to the High Court. It is a well settled that for referring a question to High Court a question of law should arise and not a mere question of fact. It is also well settled that where a question has already been settled by judgments of the Tribunal then a question of law does not arise for reference to the High Court. In this particular case, the Tribunal on examination found that both the inputs were not being utilised in the manufacture of final product i.e. synthetic rubber.
This is an admitted position by the appellants also. The appellants were using these materials as a corrosion inhibitor in cooling water system. As per the affidavit of Shri R.N. Mehrotra [filed] along with this reference application also, it is stated that the cooled water is used in all the process plants in various conden-sors and for maintaining desired temperature of polymerisation reaction for manufacture of synthetic rubber. It is their contention that the item inhibits corrosion by forming a non-volatile film on the surface of the metal which comes in contact with steam/steam condensate. Steam generated is used in all the process plants in the manufacture of finished product synthetic rubber. The Tribunal examined the facts that the items were only vised as a coolant and as a corrosion inhibitor in cooling water system in the steam generation system. The steam is used for the manufacture of the synthetic rubber. However, steam is not dutiable and there is no claim for Modvat for steam also. The Tribunal has examined the explanation to Rule 57A which defines "input" to include - (a) inputs which are manufactured and used within the factory or product or in relation to the manufacture of final product, and (i) machine/machinery plant, equipment, apparatus, tool or appliances used for producing or processing of any goods or bringing about any change in any substance in or in relation to the manufacture of the final products, (ii) packaging materials in respect of which any exemption to the extent of duty of excise payable on the value of the packing materials is being availed of for packing any final products; (iii) packaging materials the cause of which is not included or had not been included during the [preceding] financial year in the assessable value of the final products under Section 4 of the Act.
As can be seen from the Rule 57A, the input should be one which is used within the factory or product or in relation to the manufacture of final products. Admittedly, the present items as held in the Tribunal's order, were not used or in relation to the final products, but were used only for maintenance of the machinery. Therefore, the question of Modvat benefit does not arise. This is purely a question of facts and not of law, which was ascertained and finding given by the Tribunal.Equipment Sales Corporation v. Collector of Customs, Madras, the Tribunal noted that different benches taking divergent views on same issue pertaining to interpretation of Import Policy in respect of whether hypodermic disposable syringes covered by O.G.L. or covered by S.No. 521 of Appendix 3, Part A under Import Policy 1985-88 referred to the Supreme Court in terms of Section 130 of the Customs Act, 1962. This judgment is clearly distinguishable for the simple reason that there are not divergent views in respect of use of the present inputs. Therefore, the question of reference on difference of divergent opinion on the same input, not being before us, therefore, no question of law arises for reference.J.K. Synthetics v. Collector of Central Excise (supra), the Tribunal found, that Silicon Spray is used for spraying the inner portion of the jets so that when the molten material is excluded through these jets, its passage is eased for use of this lubricant and the jets are not clogged. The several judgments were cited before the Tribunal for qualifying the benefit, therefore, the Tribunal relying on the judgment of Calcutta High Court in Singh Alloys and Steel Industries v. Asstt. Collector of Central Excise - (66) E.L.T. 594, granted the benefit. It was also noted that "the fact that it is for maintaining the machine does not qualify it to the input by itself" because it is used definitely in or in relation to manufacture of finished product. In other words, without use of this material, it would not be possible to viably indicating the manufacture of yarn.
This judgment is clearly distinguishable. The Tribunal clearly found the item not being used for. maintaining the machine but it was required to be used definitely in or in relation to manufacture of the final product'. Therefore, this judgment is clearly distinguishable.
In the case of Shri Ramakrishna Steel Industries Ltd. (supra), the larger Bench of the Tribunal noticed that sand moulds had played a significant role in the manufacture of the final product. It was also found that chemicals or resin which are used in the sand mixture for the purpose of producing sand moulds are used in relation to manufacture of final product namely steel castings. This case is also distinguishable, as it was found that sand mould were very necessary to create a core for the purpose of pouring molten metal. The Tribunal on facts found that the sand mould was essential for manufacture of the final product steel castings. Hence it granted the benefit of Modvat.
In the present case the item was used as corrosion inhibitor in the machinery. It is used for the purpose of maintenance of machinery and not for even production of steam, which is used in the manufacture of synthetic rubber. Therefore, the citation relied by the Counsel was held to be distinguishable. The Hon'ble Supreme Court judgment relied by the ld. Counsel is quite explicit and clearly states that the inputs should have connection with the process of manufacture of the final product and also it has been laid down that the process should be so integrally connected with the ultimate production of goods that it would be commercially inexpedient to produce the finished goods without the use of such inputs and hence the benefit of credit of duty is required to be extended. In this case, even applying the judgment cited, it is clearly noticed that the items were not used in or in relation to the manufacture of final product',, but only for maintenance of machinery, as a corrosion inhibitor and such items are not entitled for the benefit. The Tribunal had arrived at the findings on the basis of facts. Therefore, no question of law arises for reference to the High Court.
We also notice the judgment cited by the appellant in the reference application namely Kopran Ltd. v. Collector of Central Excise as reported in 1993 (67) E.L.T. 377 (Tribunal), wherein the Tribunal found that the liquid nitrogen is needed for creating a proper atmosphere (both chilling and inert atmosphere) in the reactor vessel and if it is not used, chemical reaction process will be affected. Therefore, it grant the benefit. This case is not applicable to the facts of the case. In the case of Straw Products Ltd. v. Collector of Central Excise & Customs as reported in 1992 (59) E.L.T. 572 (Tribunal), wherein the Tribunal found that manufacture of paper was held to be eligible for credit on the basis of examination of process of manufacture of paper.
This case is also clearly distinguishable and not applicable to the facts of the case. The judgment rendered in the case of Associated Cement Co. v. Collector of Central Excise as reported in 1991 (55) E.L.T. 415 (Tribunal) wherein it was found that Explosives used for quarrying of mined products and chemicals used for treatment of water, go into the manufacture of final product, are inputs and eligible for the benefit. This judgment is also clearly distinguishable.Collector of Central Excise v. Eastend Paper Industries Ltd. as reported in 1989 (43) E.L.T. 201 (SC), the Hon'ble Supreme Court held that the wrapping paper being raw material and component part of wrapped paper is entitled for the benefit of the Notification No. 18A/83-C.E. It was also noted that the wrapping paper used in the wrapping of paper, it is to be treated as raw material or component part or other variety of paper which is wrapped. It was held that wrapping paper so consumed or utilised would be entitled for the benefit. "The Hon'ble Supreme Court further held that anything which enters into and form part of manufacturing process or required to make the article marketable, must be deemed to be a raw material or component part of the end product and must be deemed to have been used in completion of manufacture of the end product. In the light this Hon'ble Supreme Court judgment, larger bench rendered in the case of Shri Ramakrishna Steel Industries Ltd., therefore, the appellants do not qualify for the benefit of the Modvat. The issue is also a fully settled issue, hence it cannot be referred to the High Court.Continental Exporters v. Collector of Customs as reported in 1985 (22) E.L.T. 259 (Tribunal), the Tribunal held that a reference application to the High Court is not maintainable, where it deals purely with a question of fact. In the case of Bharat Earth Movers Ltd. v. Collector of Customs, Madras as reported in 1987 (31) E.L.T. 596 (Tribunal), the Tribunal held that where there is merely an appreciation of evidence, then it does not involve a question of law meriting reference. In the case of Calico Chemicals and Plastics Division v. Collector of Customs, Bombay as reported in 1986 (25) E.L.T. (Tribunal), the Tribunal held that reference to the High Court is not maintainable, if a point of law has already been settled by the Hon'ble Supreme Court. These citations apply directly to the present case.