ORDER
K.S. Venkataramani, Vice President
1. The Appellants are availing of Modvat credit under Rule 57A for payment of duty on their final products. Proceedings were initiated against them by issue of show cause notice dated 13-11-1992 alleging that they have wrongly availed Modvat credit on Caustic Soda Lye used in the manufacture of Liner Alkyl Benzene Sulphuric Acid (LABS) falling under Heading 3402 Central Excise Tariff Act. They have availed of Modvat credit on Caustic Soda Lye which is used for neutralising the gases before they are allowed to escape in the air for pollution control purposes. It was therefore alleged that Caustic Soda Lye was not used in or in relation to the manufacture of LABS and hence ineligible for Modvat credit. The jurisdictional Assistant Commissioner of Central Excise, Panvel-II Division, confirmed the demand amounting to Rs. 15,588/- and imposed a penalty of Rs. 2,000/- on the Appellant.
2. The Appellants challenged the Assistant Commissioner’s order before Commissioner (Appeals) wherein the Appellants took the stand that the demand is hit by limitation because the Assistant Commissioner cannot adjudicate it as it alleged suppression of facts under Section 11A of the Central Excise Act. The Commissioner (Appeals) observed that the show cause notice does not allege suppression of facts or mis-statement and therefore in the absence of such an allegation the Assistant Commissioner can justifiably adjudicate the matter and confirm the demand falling within the 6 months period. The present appeal has been filed against this order of the Commissioner (Appeals).
3. None is present for the Appellants despite notice. They have pleaded, on merits the Caustic Soda Lye which is in dispute, declared as input by them under Rule 57G. They have also pleaded that the expression use ‘in relation to the manufacture’ of the final product has be given a wider interpretation and they have relied upon the Madras High Court judgment in the case of Ponds India Ltd. v. CCE -1993 (63) E.L.T. 3. They have also repeated their arguments on limitation.
4. After hearing the ld. DR Shri S.V. Singh, it is seen that on merits, about eligibility of the Caustic Soda Lye the Appellants pleas has substance. The Larger Bench in the case of Union Carbide India Ltd. – 1996 (86) E.L.T. 613 has laid down that the expression used ‘in or in relation to the manufacture of the final products occurring in Rule 57A needs to be interpreted broadly and that the expression ‘in relation to the manufacture’ of the final product in that rule is obviously for the purpose of widening the ambit of the definition of inputs for the purpose of Modvat credit and that would include not only goods which are directly entering into the final products but also indirectly participating in its manufacture and which are pertaining to the manufacturing process. On applying this ratio it is also relevant to refer the Supreme Court judgment in the case of Indian Farmers Fertilisers Cooperative v. Collector -1996 (86) E.L.T. 177 wherein the Supreme Court held that treatment of effluents is an essential and integral part of the process of manufacture. Apparatus used for such treatment of effluents in a plant manufacturing particular end products was held by the Supreme Court as part and parcel of manufacturing process and that inputs used in the effluent treatment plant will be treated as used in the manufacturer.
5. Following the ratio of the Larger Bench as well as the Supreme Court (supra), on merits the Appellants succeed and accordingly the appeal is allowed.