JUDGMENT
Gowri Shankar, Member (Technical)
1. The question for consideration in this appeal is the eligibility to credit
under Rule 57R of the duty paid on machines which the appellant used in its
factory to make sand moulds and sand cores which were in turn used for
casting articles of metal. In the order impugned in this appeal, the
Commissioner (Appeals) has confirmed the finding of the Assistant
Commissioner that, since sand moulds and sand cores were exempted from
payment of duty by notification 46/94, the prohibition contained in Sub rule
(1) of Rule 57R that credit will not be available on capital goods if it
exclusively is used for making goods exempted from duty or subject to nil rate
of duty is attracted and credit was not available.
2. The counsel for the appellant contends that sand moulds and sand cores are
themselves as not excisable commodity, and not capable of being marketed.
They are used exclusively for the manufacture of casting and they have no
other use. Therefore, he says, that moulding machines which are used in the
sand moulds must be considered to be used in the manufacture of final product
i.e. metal casting. He relies upon the decision of the Tribunal in Shri Ramakrishna Steel Industries Ltd v. CCE 1996 (82) ELT 575 and other
decisions of this Tribunal.
3. In the decision that the counsel for the appellant cited, the larger bench of
the Tribunal found that sand moulds and sand cores were used relation to
the manufacture of the steel castings, and concluded that the resins and
chemicals which are used for the purpose of producing sand moulds were
inputs used in relation to the manufacture of steel castings, and concluded that
the resins and chemicals which are used for the purpose of producing sand
moulds were inputs used in relation to the manufacture of the steel castings. It
therefore declined to consider the alternative contention placed before it, that
sand moulds were intermediate products arising in the course of manufacture
of the final product. The two decisions of the Tribunal in Shivaji Works Ltd v.
CCE 1990 (50) and Mysore Kirloskar v. CCE 1990 (50) ELT 175
have held that sand moulds were not intermediate products arising in the
course of manufacture of metal castings. The reason advanced in both these
decisions for this conclusion was that sand moulds did not occur at an
intermediate stage in the “product stream of the final product and hence they
cannot be construed to be an intermediate product.” The judgment of the
Madras High Court in Ponds (India) Ltd v. CCE 1993 (63) ELT 3 has not
found it possible to accept this view. The bench was required to answer the
question whether the plastic containers manufactured in a small factory
intended to pack cosmetic preparations made by Ponds (India) were
intermediate products. It answered the question holding that they were
intermediate products.
4. In Shri Ramakrishna Steel v. CCE, the larger bench has noted that “a sand
mould’s operation consists merely temporary use of sand, along with
chemicals and resin to create a core for the purpose of pouring molten metal.”
It also noted that the use of the sand mould, a final product will never come
into being. It would therefore be correct to say that, sand moulds thus have no
independent functions or purpose. Their only purpose is to add a mould for the
casting. Nobody therefore would set out to manufacture sand moulds unless
they were to be independently used in the manufacture of castings. The
making of sand moulds therefore is an inevitable intermediate step in the
manufacture of steel castings, by a particular mode of technology. It would
therefore be correct to say that sand moulds are intermediate products.
Therefore, the provisions of Sub-rule (2) of Rule 57R would come into play.
The sand moulds are specified as final products in the annexure to Rule 57Q
and the proviso under that rule is therefore satisfied. The machinery used for
the manufacture of sand moulds therefore would rightly be considered as
capital goods.
5. Appeal allowed. Impugned order set aside.