ORDER
J.N. Srinivasa Murthy, Member (J)
1. This reference application is filed by the department under section 35G(1) of the Central Excise Act praying for making a reference to the High Court of the following questions namely.
1. Whether the interpretation of rule 57A made by the CEGAT Bench Order Nos. 1364 to 1366/97 WRB dated 27-3-97 in E/155, 156 & 935/96 Bom of the same parties, for extending the Modvat benefit for the binding materials is not covered either by Rule 57A or 57Q of the Central Excise Rules, 1944 is just, proper and correct.
2. Whether the declaration filed under Rule 57T for filing capital goods credit under Rule 57Q can be considered as declaration filed under Rule 57G(i) for claiming benefit of Modvat credit under Rule 57A of Central Excise Rules?
2. The order-in-original of Sr. no. 73,90,nil/CX/95 dated 31-10-1995, 30-11-1995 and 29-1-1996 of the Commissioner of Central Excise & Customs, Pune-II was challenged by Kalyani Steels Ltd. which ended with the bench order referred above.
3. The grounds on winch the reference is sought for are as narrated in paragraphs 6 to 9 of the application. It is stated that the order passed by the Hon’ble CEGAT is not legal, proper and correct as it is silent about the binding materials and is not correct about the mandatory provisions of filing declaration under rule 57G of the Central Excise Rules. The binding materials are not covered either by rule 57A or 57Q of the Central Excise Rules for extending the benefit, in view of the fact that they are used for fixing the refractory electrical arc furnace and cannot be considered to be used in or in relation to the manufacture of the final product, nor it can be considered as a part of the electrical arc furnace. To get the benefit under rule 57A the binding material must be input first, and then it has to be seen whether it falls under exclusion clause (i) of Explanation to Rule 57A. Further any item used for producing or processing of any goods or bringing about any change in any substance in or in relation to the manufacture of the final products cannot be considered to be inputs for availing Modvat credit under rule 57A. The process or change of process in any manner has to be understood in the wider sense which has been clearly spelt out in the Supreme Court decision in 1991 (55) E.L.T. 444 in the case of CCE v. Rajasthan State Chemical Works. In 1988 (36) E.L.T. 201 in the case of Doypack Systems Pvt. Ltd. v. UOI the Supreme Court has held that in relation to has a broad expression and its meaning included associated with or in connection. In AIR 1965 1310 in J.K. Cotton Spinning & Weaving Mills. Words in the “manufacture of goods” given in the exclusive clause (1) of explanation to rule 57A is also interpreted. By applying the ratio of the Supreme Court and considering the use of the binding accessories in the lining of refractories and electrical arc furnace, it is not used in or in relation to the manufacture of final product, and as such is not an input. Benefit under rule 57A cannot be extended to it.
4. The Hon’ble Tribunal is not correct in holding that the assessee could not have filed declaration under rule 57G(1). There is nothing to prevent them from filing the same. The Modvat procedure is an optional one and the party is to follow the law before availing of the same by filing the declaration. The Modvat provision nowhere allows the benefit with retrospective effect. The filing of declaration is mandatory one as per the decision of the Tribunal in 1990 (48) E.L.T 279 in the case of Tata Oil Mills and 1994 (74) E.L.T. 752 in the case of Indian Paper Pulp v. CCE. The party having failed to comply with the legal requirement in availing Modvat credit under rule 57A by not following the required declaration under rule 57G before availing the Modvat credit, the benefit under rule 57A cannot be extended on refractories, binding materials. In paragraph 11, it is further stated that apparently the answers to the above two questions arising out of the order are in negative, and hence the Hon’ble Tribunal’s order is not legal, proper and correct and the orders issued by the Commissioner II, Central Excise, Pune, is required to be restored.
5. Perused section 35G(1) of Central Excise Act and the bench order. Heard both sides. Relief sought for by the applicant is not in accordance with the provisions of section 35G(1) of the Central Excise Act. Apart from that, as already narrated above, the department has challenged the bench order about its legality and correctness in the reference application. The department has assertively stated the answers to the above questions are in the negative. So under these circumstances, no reference can be made under section 35G(1) of the Central Excise Act. So the application cannot be allowed and it is rejected.