ORDER
G.R. Sharma, Member (T)
1. This is a reference application which has been sent to me as a difference of opinion. The difference of opinion is “Whether the reference application deserves to be rejected as proposed by the learned Member (Technical) or the questions as framed are required to be referred to the High Court as proposed by the learned Member Qudicial). The five questions are as under :
“(i) Whether fire bricks which form part of the electric arc furnace stand excluded from modvat coverage in terms of the explanation to Rule 57A of Central Excise Rules, 1944 when they fall for classification under Chapter 69 (covering ceramics) and not Chapter 84 or 85 which cover machines and machinery?
(ii) Whether the items excluded specifically from the scope of the expression “inputs” in the Explanation to Rule 57A should be held to cover not only items like machines, machinery, equipment and apparatus but also parts thereof.
(iii) Whether the majority view in the present case was correct in not having followed the decision of the Larger Bench of the Tribunal in the case of C.C.E., Chandigarh v. A.B. Tools [1991 (71) E.L.T. 776] extending Modvat credit on an analogous input viz. ramming mass used for lining of furnace which is similar to the use of the input in question viz. refractory bricks?
(iv) Whether the majority view in the present case was correct in holding that fire bricks which are construction materials for furnaces are used only as raw materials in the manufacture and subsequent maintenance of the furnaces and as such not treatable as used “in or in relation to the manufacture” of the appellants’ final product, steel?
(v) Whether the Tribunal has erred in interpreting the observation of the Hon’ble Supreme Court in the case of C.C.E. v. Ballarpur Industries (supra) about the utilisation of the material in the manufacturing process as distinct from the manufacturing apparatus to mean that the use of fire bricks by the applicants constitutes their use as manufacturing apparatus and not use in the manufacturing process?”
2. Shri Madhav Rao, the Id. Counsel appearing for the applicants submits that the facts of the case, in brief, are that the Tribunal in its Final Order No. A/129/95-NRB, dated 21-2-1995 by majority view held that Modvat credit is not admissible on fire bricks since such bricks are not inputs for manufacture of iron and steel but are construction material used as lining furnace. The Id. Counsel submitted that in their case what is relevant is electric arc furnace: that refractory goods are identical to ramming mass and that Hon’ble Calcutta High Court in the case of Singh Alloys & Steel Ltd. reported in 1993 (66) E.L.T. 594 had given the benefit of Modvat credit; that the ratio of the Ballarpur Industries’ case reported in 1989 (43) E.L.T. 804 was not applicable to their case inasmuch as the Apex Court was dealing with the question of raw material/component. The Id. Counsel submitted that the Larger Bench of this Tribunal in the case of Union Carbide India Ltd., Calcutta and Ors. v. C.C.E., Calcutta-I and Ors. reported in 1996 (15) RLT 144 (CEGAT NB) had held as under:
“28. An examination of various tariff items and Rule of interpretation Section Notes and Chapter Notes in Schedule I to the CETA reveals that the Parliament, while dealing with various kinds of machines and the like, specifically provided for parts and accessories and the Rules of interpretation were framed to provide guidance in the matter of locating the actual position of spares and accessories among the various items, where the items do not specifically deal with spares and accessories.The total absence of any such feature in the exclusion Clause (i) in the explanation to Rule 57A of the Rules is a clear pointer to the intention of the Rule-making authority not to bring spares within the ambit of the exclusion Clause (i).”
The Id. Counsel also submitted that the Larger Bench of this Tribunal in the case of Union Carbide India Ltd. cited above observed that the Hon’ble High Court of Calcutta in the case of Singh Alloys & Steels Ltd. v. Asstt. C.C.E. reported in 1993 (66) E.L.T. 594 relied on the contention (see paragraph 21). The Id. Counsel also referred to para 25 of the decision of the Larger Bench in Union Carbide India Ltd. ‘s case in which the Tribunal had observed “The Government must have thought that only ‘self-contained, complete or whole’ machines and not parts thereof are to be excluded. This is no reason why this logically limiting restriction should not be placed on the exclusion Clause (i) of Rule 57A of the Central Excise Rules, 1944”; that the language of exclusion Clause (i) is plain and clear. It carves out ‘machines, machinery, plant, equipment, apparatus, tools or appliances…’
3. The Id. Counsel submitted that where there are two views, the case will merit reference. He submitted that the matter on ramming mass was referred to the Hon’ble Calcutta High Court. Similarly when there were two views, the matter should be referred to the High Court. In support of his contention, he cited and relied upon a decision of this Tribunal in the case of Escorts Ltd. v. C.C.E., Bangalore reported in 1995 (77) E.L.T. 298. The Id. Counsel also cited and relied upon the decision of this Tribunal in the case of Mahendra and Mahendra reported in 1994 (71) E.L.T. 152. The Id. Counsel also submitted that where there was doubt, it was necessary to refer the matter to the High Court. In support of his contention, he cited and relied upon the decision of this Tribunal in the case of Apar Ltd. reported in 1994 (72) E.L.T. 561. The Id. Counsel therefore, submitted that having regard to the above submissions made by him, he fully supports the views of Hon’ble Member (J) and prays that a reference may be made to the Hon’ble High Court on the points as set out by the Member (J).
4. Shri Satnam Singh, the Id. SDR appearing for the respondent submitted that on the basis of technical literature, it may be said that refractory material used in furnace depends on operating temperature and nature of slags; that in electric arc, the removal of “S” is due to low oxygen potential of melt and high slag basacity. The two constituents of fire bricks AI2O3 & SiC”2 have negative contribution in desulphurisation. In no way it can contribute in P & S removal from steel. It was further submitted by the Id. SDR that refractory bricks firebricks are made of alumina and silica which do not react with Phosphorous and Sulphur contents of molten metal. These bricks do not contain CaO which is essential ingredient for the removal of Phosphorous and Sulphur and therefore, the appellants’ plea that refractory/firebricks contents react with Phosphorous and Sulphur in molten steel and remove them by slagging off, is incorrect. The Id. SDR submitted that the product was not eligible for Modvet credit. Supporting the view of the Member (T), the Id. SDR submitted that it was hardly a case for reference to the Hon’ble High Court.
5. Heard the submissions of both sides. On careful consideration of the facts and the case-law cited and relied upon by the appellants, I find that still there are different views held by different Benches of the Tribunal and therefore, it is a fit case for reference to the Hon’ble High Court. I also observe that the issues have been correctly framed by the Member (J). In the circumstances, I agree with the findings of the Id. Member (J) holding that it is a fit case for reference.
Sd/-
(G.R. Sharma)
Dated : -10-1996 Member (T)
The file is sent to the referring Bench for issuing majority order.
Sd/-
(G.R. Sharma)
Member (T)
In view of the majority opinion, the questions of law as framed at paras 12(i) to 12(v) (pages 12-13) of the order be referred for decision by the Hon'ble M.P High Court. Reference application is thus allowed.