ORDER
V.P. Gulati, Member (T)
1. This appeal filed by the Department is against the order of the Collector of Central Excise (Appeals), Madras. The respondents before the lower authorities claimed the benefit of MODVAT credit in respect of Graphite rods and A.P.C. powder which they were utilising in their factory for the manufacture of castings etc. The learned original authority has held that the Graphite rods are in the nature of appliance or equipment and hence by virtue of proviso to Rule 57A the same stood excluded from the scope of the MODVAT rules for the purpose of input credit. So far as the A.P.C. powder is concerned, it has been held by the same original authority that to be not an input in relation to the manufacture of castings but in relation to the dross and gases, which are produced during the manufacturing process at the stage of melting of the metal.
2. The learned SDR for the Department pleaded that so far as crucible is concerned the same participates in the manufacturing process and but not so the carbon rod. He pleaded that the molten metal is produced in the crucibles and is poured out of the same for casting purposes. Regarding the use of the carbon rod, he read out the portion in the reply to the show cause notice by the respondents and the relevant portion is reproduced below :-
“As rightly declared by us, these rods are used for stirring pure copper melt, where it is essential that contamination of any other metal is prohibited. Hence, where normally for other type of alloy melts an iron or steel rod is used, for pure copper melt graphite rod is used for stirring the molten metal. Whatever graphite is consumed comes out as carbon dioxide and bubbles through the molten metal. Hence, it is a consumable used in relation to manufacture of final product only. It is international practice to use graphite rod for stirring pure copper melt.
2.1. A small quantity of these graphite rods are also used, after converting, as an “intermediate ring” in the continuous casting process. In this process, the intermediate ring is placed in such a way through which the molten metal passes through the die and the metal solidifies by the process of cooling water circulating around the die. The intermediate ring holds the die in place. The graphite intermediate ring is very essential in the continuous casting process. Hence, the input used is in relation to manufacture of final products only. It is neither an equipment nor an appliance. If the graphite rods are considered as an equipment or appliance, we submit, they merit classification under Chapter 84 or 85 and not under Chapter 38.”
In regard to the A.P.C. powder, the learned SDR again referred to the write up as set out in the reply to the show cause notice and the relevant portion is reproduced below:
“This is a flux used as an anti-piping compound. This powder is spread on the molten metal as it comes up in the riser. This is used to prevent the molten metal in the riser from solidifying so that it can feed the shrinkage in the casting.”
Further, the learned S.D.R., while reiterating the grounds set out in the grounds of appeal, pleaded that the graphite rods do not go into the material of the final manufacture and the intermediate rings made from these graphite rods are used alongwith the die which is in the nature of a tool and, therefore, do not qualify in view of the exclusion under Rule 57A for the MODVAT credit. So far as the rods are concerned these are in the nature of apparatus and appliances and in regard to the A.P.W. powder, he pleaded, it is in the nature of foundry flux spread on the molten metal and it prevents it from solidifying at the raiser point on the surface and also ensures the melting of unwanted gases through the vent and some of the unwanted materials become dross at the surface and since the dross and gases do not form part of the casting process, the use of the material cannot be in relation to the manufacture of castings, the specified product.
3. The learned Advocate for the respondents drew our attention to the reply to the show cause notice referred to above and urged that the order of the learned Collector (Appeals) allowing the appeal before him was maintainable.
4. We observe that so far as crucibles are concerned, the respondents are not in appeal against the findings of the Collector (Appeals) in respect of that item. The Revenue is, however, aggrieved of the learned Collector (Appeals)’s findings that the Graphite rods and the A.P.C. powder are eligible for the benefit of MODVAT credit. We observe that so far as A.P.C. powder is concerned, admittedly it is required to be used on the surface of the molten metal and is an essential requirement in the process of manufacture of the metal for use of the same for the manufacture of the castings. Removal of the impurities is essential requirement and so also the venting of the gases. In this context we, therefore hold that the use of A.P.C. powder is during the process of the manufacture of the castings at an intermediate stage and we do not find any merit in the plea of the Revenue in this regard. So far as the use of rod is concerned, it is admittedly for stirring of the molten metal and during the course of stirring it gets consumed also. The question would be whether it is used as such would bring it within the excluded category of items under Rule 57A. Item (i) under Explanation to Rule 57A(1), which covers the excluded categories within which the item has been held to be falling by the learned lower authority is as under :-
“(i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products.”
The plea of the Revenue is that the rod could be considered either as a piece of equipment or apparatus. So far as the terms “apparatus” and “equipment” are concerned, the same in the dictionary has been defined as under :-
THE CONCISE OXFORD DICTIONARY
Apparatus : equipment for doing something, e.g. gymnastics or scientific ex-
periments; organs effecting a natural process;
Equipment: equipping or being equipped; manner in which person or thing
as equipped; outfit, tools, apparatus, necessary for expedition,
job, warfare, etc.
CHAMBERS ENGLISH DICTIONARY
Apparatus : things prepared or provided, material:-set of instruments, tools,
natural organs etc.: materials (as various readings)for the criti
cal study of a document;
Equipment: the act of equipping; the state of being equipped; things used
in equipping or furnishing; outfit;
WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY
Apparatus : a. set of materials or equipment designed for a particular use;
b. an instrument or appliance designed for a specific operation;
a group of bodily parts and esp. organs having a common func-
tion: 2. the functional processes by means of which a sys-
tematized activity is carried out;
Equipment: the set of articles or physical resources serving to equip a per-
son or thing: as (1) the implements used in an operation or
activity: APPARATUS (2) all the fixed assets other than land and build-
ings of a business enterprise; b. a piece of such equipment.
The rod has to be considered as a piece of equipment performing a desired function of stirring the metal mix. The rod is used for stirring of the molten metal and if stirring is held to be a process in or in relation to the manufacture of final product, then the rod by virtue of its being a piece of equipment will stand precluded from the scope of the MODVAT scheme. The term “process” in the Concise Oxford Dictionary has been defined as “course of action, proceeding, esp. series of operations in manufacture printing, photography, etc.” In this context it has to be held that stirring is a process undertaken during the manufacture of castings at a intermediate stage. We, therefore, have to hold notwithstanding the fact that the carbon rod also gets partly consumed while stirring, the same stands precluded from the scope of the MOD VAT Scheme for the purpose of availing the input duty MOD VAT credit. We, therefore, set aside the order of the learned Collector (Appeals) so far as this item is concerned and allow the appeal of the Revenue. The appeal is disposed of in the above terms.