Natraj Ceramic and Chemical Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. the appellants manufactured refractory bricks and mortars. they were consuming these articles for lining the furnaces in which such bricks and mortars were manufactured. they claimed benefit of notification no.217/86 as amended for such captive use of the products. the classification list in which the benefit was claimed was approved but later a show cause notice was issued claiming that the benefit of the notification was not available since the goods were not used for the manufacture of the final product. it was also alleged that no declaration under rule 57g(1) was filed by the assessee claiming the contested goods to be inputs. the assistant collector held that the bricks and mortars used for repairs of the kilns would not be eligible for the benefit of the notification in view of the part (i) of the explanation thereto. on this ground he confirmed the demand made in the show cause notice. the collector (appeals) having upheld the lower orders, the present appeal is before us.2. we have heard shri m.p. devnath, learned advocate for the appellants and shri r.s. sangia, jdr for the revenue.3. we have carefully considered the submissions made by both sides and have also perused the notification.4. shri devnath refers us to the order of this very bench bearing number 693/97-d, dated 11-7-1997 where the benefit of notification no.118/75 was extended to the same goods used in the same manner by the same appellants. it is his submissions that the ratio of this judgment would have a direct application. on comparison of the notifications, we find that the benefit given under notification no. 118/75 is far reaching inasmuch as it covers goods "intended for use". the conditions stipulated in notification no. 217/86 being more stringent we hold that the ratio of earlier judgment does not apply.5. both rule 57a and the impugned notification used the same phrase namely "inputs". the explanation which excludes certain inputs from the benefit of both the rule and the notification are similarly worded. but the similarity ends here. in [order] to qualify for the benefit of this notification, it is not necessary that a [manufacturer] is a modvat users. nothing in the notification makes such suggestion. therefore, the allegation that because of the assessee had not filed a declaration as required under rule 56g(1), in respect of these two inputs, the benefit of this notification is not available; is wholly wrong.however, in interpretating the exclusion clause, the judgments delivered in relation to the exclusion under rule 57a would become material.6. in the show cause notice in the case before us it has been suggested that the contested goods would fall under the exclusion category of machines or machinery, equipments etc. shri sangia in his submissions also strongly advocates this contention. we find that this very issue was examined by the larger bench of the tribunal in. their decision in the case of union carbide india ltd. v. collector of central excise, calcutta-i, reported 1996 (86) e.l.t. 613 (tribunal) in which it was held that the wording "inputs used in relation to the manufacture" was capable of including parts of accessories and consumable such as felts, stainless steel wire cloth used in the manufacture of paper. following the ratio of the judgment, the cegat in their decision in the case of hindako industries ltd. v. commissioner of central excise, allahabad - 1996 (88) e.l.t. 519 (tribunal) held that these very items namely refractory products and cement used for lining of furnaces were eligible inputs under rule 57a. since the wording in the exclusion clause is identical, the ratio of the judgment is directly applicable in interpretating the cited notification.7. in view of our holding that refractory bricks and refractory mortars were goods used in the manufacture of refractory bricks and mortars and in. view of our finding that procedural requirement of the rules relating to modvat had no bearing on the benefit of this notification, we allow this appeal set aside the lower order and direct consequential benefit to the extent available and claimed.

Judgment:
1. The appellants manufactured refractory bricks and mortars. They were consuming these articles for lining the furnaces in which such bricks and mortars were manufactured. They claimed benefit of Notification No.217/86 as amended for such captive use of the products. The classification list in which the benefit was claimed was approved but later a show cause notice was issued claiming that the benefit of the notification was not available since the goods were not used for the manufacture of the final product. It was also alleged that no declaration under Rule 57G(1) was filed by the assessee claiming the contested goods to be inputs. The Assistant Collector held that the bricks and mortars used for repairs of the kilns would not be eligible for the benefit of the notification in view of the Part (i) of the Explanation thereto. On this ground he confirmed the demand made in the show cause notice. The Collector (Appeals) having upheld the lower orders, the present appeal is before us.

2. We have heard Shri M.P. Devnath, learned Advocate for the appellants and Shri R.S. Sangia, JDR for the Revenue.

3. We have carefully considered the submissions made by both sides and have also perused the notification.

4. Shri Devnath refers us to the order of this very Bench bearing number 693/97-D, dated 11-7-1997 where the benefit of Notification No.118/75 was extended to the same goods used in the same manner by the same appellants. It is his submissions that the ratio of this judgment would have a direct application. On comparison of the notifications, we find that the benefit given under Notification No. 118/75 is far reaching inasmuch as it covers goods "intended for use". The conditions stipulated in Notification No. 217/86 being more stringent we hold that the ratio of earlier judgment does not apply.

5. Both Rule 57A and the impugned notification used the same phrase namely "inputs". The Explanation which excludes certain inputs from the benefit of both the rule and the notification are similarly worded. But the similarity ends here. In [order] to qualify for the benefit of this notification, it is not necessary that a [manufacturer] is a Modvat users. Nothing in the notification makes such suggestion. Therefore, the allegation that because of the assessee had not filed a declaration as required under Rule 56G(1), in respect of these two inputs, the benefit of this notification is not available; is wholly wrong.

However, in interpretating the exclusion clause, the judgments delivered in relation to the exclusion under Rule 57A would become material.

6. In the show cause notice in the case before us it has been suggested that the contested goods would fall under the exclusion category of machines or machinery, equipments etc. Shri Sangia in his submissions also strongly advocates this contention. We find that this very issue was examined by the Larger Bench of the Tribunal in. their decision in the case of Union Carbide India Ltd. v. Collector of Central Excise, Calcutta-I, reported 1996 (86) E.L.T. 613 (Tribunal) in which it was held that the wording "inputs used in relation to the manufacture" was capable of including parts of accessories and consumable such as felts, stainless steel wire cloth used in the manufacture of paper. Following the ratio of the judgment, the CEGAT in their decision in the case of Hindako Industries Ltd. v. Commissioner of Central Excise, Allahabad - 1996 (88) E.L.T. 519 (Tribunal) held that these very items namely refractory products and cement used for lining of furnaces were eligible inputs under Rule 57A. Since the wording in the exclusion clause is identical, the ratio of the judgment is directly applicable in interpretating the cited notification.

7. In view of our holding that refractory bricks and refractory mortars were goods used in the manufacture of refractory bricks and mortars and in. view of our finding that procedural requirement of the rules relating to Modvat had no bearing on the benefit of this notification, we allow this appeal set aside the lower order and direct consequential benefit to the extent available and claimed.