Full Judgment Text
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CASE NO.:
Appeal (civil) 5168-5170 of 2001
PETITIONER:
Collector of Central Excise, Bangalore
RESPONDENT:
Vs.
M/s. Escorts Mahle Ltd.
DATE OF JUDGMENT: 06/05/2003
BENCH:
M.B. SHAH & ARUN KUMAR
JUDGMENT:
J U D M E N T
With Civil Appeals Nos. 443/2002, 2128/1997,
968/2003, 1122/2003 & 1810/2003
ARUN KUMAR, J.
These appeals are directed against the judgment of the
Karnataka High Court while answering a Reference made
under Section 35(G) of the Central Excise and Salt Act,
1944. The question relevant for our purpose is reproduced
as under :
"Whether on the facts and in the
circumstances of the case the appellate
Tribunal is right in law in holding that the
applicants are not eligible to MODVAT
Credit in respect of Ramming Mass, Fibre
glass and filter mesh used in or in relation to
the manufacture of pistons on the ground
that they are covered under Proviso to Rule
57A of the Central Excise Rules."
In order to appreciate the controversy, the relevant
facts are that the assessees claimed benefit of MODVAT
Credit in respect of Ramming Mass, Fibre glass and filter
mesh. These items are used in the process of manufacture
of steel and without the use of these items the end product
cannot be produced. The assessees in these cases are
engaged in the manufacture of items of steel like pistons in
the Escort’s case. The manufacture takes place in electric
arc furnace refractories. It is submitted on behalf of the
assesses that during the course of manufacture steel is
melted at a very high temperature. Steel produces acidic
vapours when melted at such a high temperature. To
contain the vapour and neutralise them, chemicals like
dolomite or magnesite are used during the course of
manufacturing process. Ramming Mass, fibre glass and filter
mesh are processes in which chemicals are used to line the
furnaces to neutralise the effect of acidic vapours produced
during the course of melting steel. Unless these chemicals
are used, the furnace may burst. Accordingly, it is submitted
on behalf of the assesses that these chemicals being
necessary inputs in the process of manufacture of steel
items, MODVAT Credit has to be allowed on them.
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In respect of this contention that it is necessary to use
such processes like Ramming Mass, the learned counsel
appearing for the assesses drew our attention to a book
titled as "Electric Furnace Steel Making (American Institute
of Mining)" wherein while dealing with electric arc furnace
refractories, it is stated on page 157 as under :
"It is well known that much of steel making
and refining is concerned not only with the
removal of carbon to steel chemistry ranges
but also with the removal of phosphorus and
sulfur to appropriately low values. Since
phosphorus and sulfur are chemically acidic
materials, their removal from the melt is
effected by combining them with the basic
material lime (CaO) which holds them in the
slag. However, for the lime to function in
this role it must be allowed to react with the
sulfur or phosphorus in the melt and not with
the silica from the refractories â\200\223 a more
acidic material than phosphorus or sulfur.
Accordingly, a basic refractory-lined
container(of dolomite or magnesite) is
provided to allow the removal of the
undesirable phosphorus and sulfur from the
melt to the slag without excessive corrosion
of the refractory lining."
Keeping the aforesaid manufacturing process in view
and also bearing in mind that it is essential to control the
acidic vapours generated during the steel manufacturing
process, this Bench has held in C.A. No.6615/2003
[Collector of Central Excise vs. Steel Authority of India
Limited ] that use of such chemicals is essential for the
manufacturing process. Specifically, it was observed that :
"As discussed by the concerned authority
burnt dolamite is used so as to neutralize
the acid which is formed at the time of
manufacturing steel. This burnt dolamite is,
therefore, used in relation to manufacturing
of the final product. It has been rightly
pointed out that respondent is using burnt
dolamite in relation to manufacture of final
product so that it may combine with acid
which is formed at the time of manufacture
of the steel and neutralize the said acid so
that it may prevent damage to the furnace.
But the used burnt dolamite is for
neutralizing the acid form in the course of
manufacture of steel. Hence, the judgment
cannot be said to be, in any way, illegal or
erroneous. The appeal is, therefore,
dismissed. There shall be no order as to
costs."
Manufacturing process being the same in these cases,
we hold that the assesses are entitled to MODVAT Credit on
Ramming Mass, Fibre glass and filter mesh.
The appeals are accordingly dismissed with no order as
to costs.
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