Customs, Excise and Gold Tribunal - Mumbai
Gujarat Guardians Ltd. vs Commissioner Of C. Ex. on 26 November, 1997
Equivalent citations: 1998(99)ELT90(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The issue in this appeal is the eligibility to Modvat credit of the duty paid on electric wires and cables, 'G' rack, and ceramic refractories. The goods were received and credit taken by the appellant in terms of Rule 57Q in August, and September, 1994. In the order impugned in the appeal the Commissioner has disallowed the credit on the ground that the goods are not capital goods as defined in the Explanation to Rule 57Q.
2. We have heard both sides. The departmental representative adopts the reasoning in the order. We shall discuss each of the items separately.
Electrical wires and cables : The Commissioner, has disallowed the credit on these goods for the following reasons. "Looking to the nature of capital goods received I find that the electrical wires and cables which are vised for connecting the supply from one place to another place do not fall within the purview of the capital goods, because the measurements of such electric wires and cables depend upon the distance of the electricity connecting boards to the machines installed in the Plant. Only the part of electrical wires and cables which is connecting to the machinery becomes essential part of the machinery used for producing and processing and the rest of the part of the cables and wires are not considered as machinery, machines, equipment, apparatus or parts thereof used for in any manufacturing process or production of final product." The Commissioner thus considers that the length of wires and cables which connect distribution boards to the machines are capital goods. Now if the length of cables which connect the machine to the distribution coil is to be considered as capital goods it would logically follow that the cables which supply electricity to such distribution boards would also have to be treated on the same footing. If the electricity is not supplied to the distribution coil the cable connecting the machine to the distribution coil board be rendered an ideal piece of equipment. All that such a cable does is to conduct electricity from the distribution board to the machine. If the electricity did not reach the distribution board there would be need for a cable to go from the distribution board to the machine. The cable between the distribution board and the machine is nothing other than the extension of the cable from the power source transformer or similar item in the factory to the distribution board. This Tribunal has held in CCE v. Nova Udyog - 1996 (88) E.L.T. 532 that electrical wires and cables within the factory are capital goods. In any event, the cables would have to be considered as parts of the plant and eligible for credit on this account also.
Ceramic bricks : The Commissioner has disallowed credit on the ground that they are not machinery, plant, equipment, tools or appliances. He also relies upon the fact that by the amendment made to Rule 57Q on 16-3-1995 by Notification 11/95 ceramic refractories were included in the definition of capital goods in the Rules. Therefore he says, they could not be considered to be capital goods prior to this.
3. The appellant relies upon the decision of this Tribunal in J.K. Synthetics v. CCE -1996 (88) E.L.T. 785, to say that the amendments made to Rule 57Q in Notification 14/96, is clarificatory in nature and therefore, retrospective in application. We are however, of the view that even without this decision the refractories are to be capital goods. The Commissioner himself agrees that refractories are used for maintaining the temperature of the furnace for producing or processing goods for manufacture of "final products". From this, it would follow that this cable is a component part of the [furnace].. They would thus be eligible for credit as such in terms of Clause (b) of the Explanation to Rule 57Q.
"G Racks" : It was explained that G Racks are used for storing and shifting intermediate product from place to place, and also for more finished products. These racks consists of a structure on casters with horizontal shelves to provide spaces into which glass sheets after they are formed, are placed so that they can be [moved] without damage. Commissioner has held that the racks are not used for producing products or to bring about any change in [the] manufacture and therefore not capital goods.
4. The departmental representative relies upon the decision of the Tribunal in CCE v. Shanmugaraja Spg. Mills Pvt. Ltd. - 1997 (89) E.L.T. 84 (Tribunal) in support. In this decision the Tribunal has held that a plant required for maintaining the desired level of humidity in the assessee's factory is not used for producing or processing textile products or for bringing about any change in substance in the manufacttire of that product and hence is not capital goods. In CCE v. M.M. Forgings - 1997 (89) E.L.T. 617 the Tribunal held that fork lift trucks which are used for transporting raw materials and products or components are capital goods because without them raw-material could not be transported to the place wherever required for processing and, therefore, that use was essential. The same reasoning would apply to the racks. The Commissioner has noted that the contention of the assessee before him that the G racks are vised to shift transport glass one its form such as to the second stage of products, i.e. they used to transport the glass in an intermediate stage or in semi-finished condition. In his discussion he accepts the contention that they [are] used for shifting the goods from the furnace to the subsidiary line where glass is washed and packed in wooden cases. The goods manufactured by the appellant, cannot be considered to have reached the final stage of manufacture unless they are packed. That is to say "G racks" help to render the goods marketable. It is settled law that anything which is required to render the goods marketable is manufacture as defined in Section 2(f) of the Act be true as the departmental representative stated that the G racks are essential and other equipments could be used in the transport of glass. In that case however, such other equipment would qualify for same consideration such "G" racks. In fact the Commissioner has himself held a hydraulic crane which he says is used to shift semi-manufactured goods for further processing, or to pack finished glass to be capital goods. If that is the case this would have to be some other specific reason for considering G racks separately. They perform the same function as the hydraulic cranes. No such reason is given. It has, therefore, to be held that these goods are capital goods.
5. Appeal is, therefore, allowed. Impugned order set aside.