ORDER
S. Kalyanam, Member (J)
1. This appeal is filed by the Department and directed against the order of the Collector of Central Excise (Appeals), Madras, dated 20-4-1989.
2. Shri Subramanian, the learned D.R., submitted that the issue is with reference to the eligibility to MODVAT credit in respect of two inputs viz. Rust Preventive Oil and Oxygen alleged to have been used by the respondents in relation to the manufacture of textile machinery parts. The learned D.R. fairly conceded that the issue in respect of Rust Preventive Oil is already covered by the ruling of this Bench in favour of the respondent by Order No. 147/1990 dated 31-1-1990. The learned D.R. submitted that in respect of Oxygen it is used only for the purpose of testing the steel used in the manufacture of the components and as such cannot be said to be in relation to the manufacture of the end-product entitling the petitioner to MODVAT credit.
3. Shri Raghavan, the learned counsel, submitted that the use of Oxygen is absolutely indispensable in the manufacture of the end-product and for the grant of MODVAT credit having regard to its function on a liberal approach MODVAT credit should be allowed.
4. We have considered the submissions made before us. Following the ratio of the ruling of this Bench cited supra, we confirm the order of the lower appellate authority allowing MODVAT credit in respect of Rust Preventive Oil and so far as Oxygen is concerned in our view, it would be far fetched lo contend that Oxygen is used as an input in relation to the manufacture of the end-product for the purpose of grant of MODVAT credit. Therefore, we hold that the respondents are not eligible to the grant of MODVAT credit in respect of Oxygen and in this view we set aside that part of the order of the lower appellate authority allowing MODVAT credit in respect of Oxygen.
5. In the result the appeal of the Department is partly allowed.
V.P. Gulati, Member (T)
6. I agree. I however, observe that in so far as the use of Oxygen for the purpose of testing of steel is concerned, it is in the nature of quality control check. We have held in a number of decisions that where the materials are prepared by use of some inputs for final use in the process of manufacture the same would be eligible for the benefit of MODVAT credit. Testing could not be considered such an activity. In this view of the matter the learned lower authority’s order in regard to Oxygen cannot be held to be proper one and, therefore, we set aside the impugned order so far as the MODVAT credit allowed in the case of Oxygen is concerned.