ORDER
Archana Wadhwa, Member (J)
1. The short question required to be decided in the present appeal is as to whether carbon tubes and sleeves are eligible modvatable inputs in terms of the provisions of Rule 57A.
2. The appellants are engaged in the manufacture of various tungsten carbide products. The use of the inputs in question, as detailed in the memo of appeal is as under:
(iv) The appellant states that the said input are used in two specific areas, which are:
(A) Carburization and
(B) Sintering
Electrical current flows through the Carbon Tubes, thus heating them upto a maximum temperature of 1850 degree C. During the carborization and sintering processes the following takes place
(A) Carburization
In this process Tungsten metal powder is mixed with Carbon black powder and packed in graphite boats. These boats are passed through this carbon tube at temperatures ranging from 1500 degree C to 1850 degree C. The atmosphere inside the tube is hydrogen gas.
Hydrogen gas reacts with the carbon of the tube to form Methane gas at temperatures of 600 degree C – 700 degree C. The reaction is C + 2H2 = CH4. The Methane gas when it comes in contact with the metal powder at high temperature (more than 1000 degree) cracks to form soot (carbon) CH4 = C + 2H2.
This carbon reacts with the metal to form Tungsten Carbide. If no carbon is mixed initially with the metal powder than this reaction can introduce about 3% of carbon in the tungsten.
The requirement is 6.13%. Hence, normal practice is to add carbon black to the metal powder. If carbon tube and sleeves are not used then the hydrogen will react with the carbon black which had been added for the powder and remove it in the form of methene. Thus, it would be impossible to produce the correct quality of carbide powder having carbon content of 6.13 – 6.15%.
(B) Sintering:
The tungsten carbide thus produced is further processed by milling with cobalt powder, drying in vacuum, pressing and presenting before final sintering. During all these intermediate operations the tungsten carbide loses some amount of carbon (1-2%) by oxidation.
This amount of carbon which is lost must be replaced during sintering, so that the final product has the right quality. The carbon is added to the product from the carbon tube and sleeves by a similar process as described for carburization. If no carbon tubes are used, then the product will have less than adequate carbon. In such a case a very brittle phase called Eta-phase (CO3W3C) forms.
Presence of this Eta-phase is very dangerous for the product as it breaks very easily.
Hence, the product gets rejected and cannot be supplied to the market.
3. From the above the appellant contends that the carbon tubes and sleeves are essential for the making of their final product and play a vital role. The sleeves used for preventing the loss of carbon and for maintaining carbon balance during the manufacturing process play a very important role and the carbon of the tube served as a raw material for the carbon addition to the carbourised/sintered products. The appellants have placed reliance upon the Tribunal’s larger Bench decision in the case of CCE Raipur v. Hira Ferro Alloys Ltd. RLT (LB-CEGAT) 1519 : 2000 (93) ECR 683 (T) wherein lencing pipe used for evacuating the moulten metal from the furnace was regarded as an input, following another decision of the Tribunal’s Larger Bench in the case of Union Carbide India Ltd. v. CCE Calcutta 1996 (15) RLT 144 : 1996 (66) ECR 172 (T). The appellants have also challenged the impugned order on the ground of limitation inasmuch as the modvat credit was availed after filing a declaration and the show cause notice was issued after a gap of about two years alleging that declaration was filed with a deliberate intention to avail the modvat credit wrongly.
4. After hearing the ld. JDR appearing for the Revenue I find that the issue is no more res Integra. The detailed use of the carbon sleeves and carbon tubes show that the same are used as inputs in the manufacture of the appellants’ final product, the benefit of modvat credit cannot be denied to the same. I also note that the credit was availed by the appellant after filing a declaration, the Deputy Commissioner in his impugned order has observed that the assessee made a wrong declaration to the fact that the said goods were used as input for their final product and thereby deliberately availed modvat credit with an intention to evade payment of duty. However, he has not elaborated upon as to how the declaration was wrong. The show cause notice has been issued on 4.9.1996 for the period 1992-93 to 1995-96. During all these period the appellants have been submitting all the relevant documents to the department along with the copies of RG-23A part-I and part-IL The declaration was duly acknowledged by the proper officer and no objection was raised in respect of the said inputs in question. As such it cannot be held that the appellant suppressed any material from the Revenue with intention to avail wrong modvat credit. They succeed on the point of limitation also.
5. In view of the foregoing the appeal is allowed with consequestion (sic) relief to the appellants. Stay petition also gets disposed of.
Pronounced in the court.