ORDER
K. Sankararaman, Member (T)
1. The Reference Application filed by the Commissioner of Central Excise, Meerut seeks the following question as a question of law arising out of the Tribunal Order No. A-1964/96-NB, dated 16-7-1996 to be referred to the High Court:
“Whether Modvat credit will be admissible under Rule 57A on lubricating oil, Hydraulic oil and Gear oil which do not go in the stream line of production of final product and the functional use of which is lubrication of machines only.”
By the subject order, the Tribunal held that the items in question were eligible for the benefit of Modvat credit and allowed the appeal upholding the claim of the appellants who are respondents in this Reference matter. Objection was that these oils were not used in relation to the manufacture of their final product, copper strips/foils, and aluminium articles and that such use was for protecting the products from developing cracks as also to render the product smooth besides rendering the machines installed in the factory operational. The stand of the lower authorities was that these oils are not used in the manufacture of final product but used for lubricating purposes and as Modvat credit can be allowed only on those inputs which are used in or in relation to the manufacture of the final product, these items do not qualify to be inputs in terms of Rule 57A of Central Excise Rules, 1944. That finding was set aside by the Tribunal, as stated above leading to the present Reference Application.
2. The applicant Collector was represented by Shri Y.R. Kilania, learned Departmental Representative. He argued in support of the application stating that the manner of use of the items in question does not satisfy the requirement of Rule 57A and the Tribunal’s order holding otherwise has given rise to a question of law which may be referred to the High Court.
3. The submission was resisted by Shri R.S. Pandey, learned Consultant. He submitted that the Tribunal’s order is based on a correct appreciation of the factual and legal position and has followed earlier Tribunal decisions including that of a Larger Bench. The use of the oils is not only for lubrication of the machines used by the respondents for manufacturing their products but these are also required to be applied on the surface of the materials being manufactured for necessary protection and for their proper formation free from defects. He placed certain Technical References from books on Metallurgy in support of the claim. Hence they are definitely inputs satisfying the requirement of Rule 57A he contended and added that no question of law has arisen out of the Tribunal’s order.
4. I have considered the submissions. I have perused the record. The main thrust in the application is that the oils in question do not go into the stream line of production but are used for lubricating purposes only and not in relation to the manufacture of the final product. I find that the preset order of the Tribunal followed an earlier order of this Bench as well as that of the Larger Bench. The former was in Pragati Paper Mills (P) Ltd. v. Collector of Central Excise, Meerut reported in 1996 (88) E.L.T. 137 wherein it was held that lubricating oil is an eligible input for the purpose of Rule 57A for availing Modvat credit. That decision also followed the same Larger Bench decision in Shri Ramakrishna Steel Industries v. Collector [1996 (82) E.L.T. 575] which has been taken note of while passing the order in the present case. Relevant portion of the Pragati Paper Mills’ order has also been extracted in the order under consideration while following it. The scope of the expression “use in the manufacture” had come in for examination before the Supreme Court in J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. Sales Tax Officer [AIR 1965 SC 1310] wherein it was held that where any particular process is so integrally connected with the ultimate production of goods, that but for that process, manufacture or processing of goods would be commercially inexpedient, the goods required in that process would fall within the expression “in the manufacture of goods”. In Rule 57A the requirement is not confined to use in the manufacture but use in relation to the manufacture also. The Larger Bench decision which was followed took note of this enlarged scope of the expression used in Rule 57A. The Reference Application has not taken note of the ratio of these decisions which were followed while passing the order in the present case. It has only been stated in the application that the oils do not go into the stream line of production of the final products. Such a contention ignores the actual wording used in the Rule, namely use in or in relation of the manufacture of the final product. It is merely asserted that the oils are used for lubricating purpose only and not used in or in relation to the manufacture of final product. It is the contention of the respondent that the use of the oils is not only for lubrication of the machines but on the materials also in the manufacturing process. Such use is definitely in the manufacture of the products. The use for lubricating the machines also is in relation to the manufacturing process only and without such use manufacture will not be commercially expedient. The test laid down by the Supreme Court in the J.K. Spg. & Wvg. Mills’ case is satisfied. The items are used in a manner satisfying the requirement of Rule 57 A and they do not fall under the excluded category as per the Explanation therein. The Tribunal decision sought to be referred to the High Court has been passed after taking note of this position. The order has not given rise to any question of law as raised in the application or otherwise. The application is dismissed.