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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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