Customs, Excise and Gold Tribunal - Tamil Nadu
Cce vs Pkpn Spinning Mills (P) Ltd. on 24 June, 2005
ORDER P.G. Chacko, Member (J)
1. This matter was heard in part yesterday. In order to enable the respondents' counsel to produce a copy of the assessee's Memorandum of Appeal filed with the lower appellate authority, a day's time was given. Accordingly, the matter has arisen today.
2. Examined the records including the above Memorandum of Appeal and heard both sides. Capital goods credit of Rs. 20,800/- was allowed to the respondents by the lower appellate authority in respect of "plastic crates" SH 3923.90) for the period September 2001 and May 2002. Hence this appeal of the department.
3. In the impugned order, Ld. Commissioner (Appeals) has relied on the Supreme Court's judgments in J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. STO Kanpur 1997 (91) ELT 34 (SC), wherein the expression "in the manufacture of goods" was interpreted by the court and it was held that it should normally encompass the entire process of converting of raw material into finished goods. Ld. Commissioner (Appeals), on this basis, treated the plastic crates' as inputs and allowed input duty credit to the assessee, notwithstanding the fact that assessee had not claimed such a relief. In the present appeal, the rationale of the above view taken by the ld. Commissioner (Appeals) has been questioned. It is pointed out that the Supreme Court's decision did not consider any machinery or any part or accessory thereof, as input. This ground has been reiterated today by ld. SDR. It is submitted by ld. Counsel for the respondents that the definition of "input" under Rule 2(f) of the Cenvat Credit Rules, 2001 and under the corresponding provision of the Cenvat Credit Rules, 2002 is wide enough to include any goods (except High speed oil and Motor spirit) used in or in relation to the manufacture of final product whether directly or indirectly and whether contained in the final product or not. It is his argument that "plastic crates" fitted well into this definition. It is, further, pointed out that this Bench allowed capital goods credit under Rule 57Q of the Central Excise Rules in respect of 'plastic crates' for the month of October 1999 in the case of CCE Salem v. Cheran Spinners .
4. After giving careful consideration to the submissions, I find that, under Rule 2(b) of the Cenvat Credit Rules, 2002/2002, "capital goods" for the purpose of Cenvat credit were specified in an exhaustive list, which reads as under:
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act;
Components, spares and accessories of the goods specified at (i) above;
Moulds and dies;
refractories and refractory materials;
tubes and pipes and fitting thereof;
pollution control equipment; and storage tank, used in the factory of the manufacturers of the final products, but does not include any equipment or appliance used in an office.
5. The "plastic crates" under consideration are falling under SH 3923.90 of the CETA Schedule and the same are not covered under Sl. No. (i) above. The respondents have no case that these plastic crates are components, spares and accessories of any of the goods specified at (i) above, nor do they say that these crates are covered by any of the subsequent entries (iii to vii) above. Hence there is no question of allowing capital goods credit on the plastic crates to the respondents for the aforesaid period. The case of Cheran Spinners (supra) is one which arose under the erstwhile Rule 57Q of the Central Excise Rules, 1944 for the period October 1999. I have found nothing in parallel between the scope of capital goods under Rule 57Q and under Rule 2 ibid. Hence the cited case law is inapplicable. The question which now arises is whether input duty credit could be allowed in lieu of capital goods credit. The lower appellate authority has granted this benefit by relying on the Supreme Court's decision in J.K. Cotton Spinning and Weaving Mills (supra). That was a case which arose under the Sales Tax Act and the question before the Apex Court was whether the entire process of converting raw materials into finished goods was encompassed in the expression "in the manufacture of goods" used in the relevant provision of the Sales Tax Act. As rightly contended by the appellant, there is nothing in this judgment which would support the view that capital goods used in relation to the manufacture of other goods can be treated as input or raw material. The term "input" has a conventional meaning. It should get wholly or substantially used-up by the time the output emerges. The plastic crates used by the respondents as material handling equipment can hardly be treated as inputs as the definition of "input" under Rule 2 of the Cenvat Credit Rules, 2001/2002 cannot be extended so as to encompass the goods which are conventionally regarded as capital goods. There is a clear dividing line between the two and this aspect was not subject matter of J.K. Cotton Spinning and Weaving Mills (supra). This apart, the alternative plea of input duty credit is being raised for the first time before the Tribunal. I have seen the respondents' reply to the show-cause notice and perused their Memorandum of Appeal filed with the Commissioner (Appeals). Neither of them contains the above plea for input duty credit on 'plastic crates'.
6. In the result, the impugned order gets set aside and this appeal is allowed.
(Dictated and pronounced in open Court).