Customs, Excise and Gold Tribunal - Bangalore
Transformers And Electricals Kerala ... vs The Commissioner Of Central Excise ... on 10 February, 2006
ORDER S.L. Peeran, Member (J)
This appeal arises from Order-in-Appeal No. 47/05 dated 26.8.2005 passed by Commissioner (A), Cochin by which Commissioner (A) has confirmed the Order-in-Original denying the cenvat credit in terms of table reproduced.
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Name of the Duty paying Amount of Entry No. Remarks
item document No. & duty (credit vide which
date taken) credit is taken
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Digital B/E Rs. 4,20,535/- 45/3.4.03 Imported Multimeter & No. 5012/28.3.03 (CVD) goods Insulation Resistance Tester (Megger) Vibration Inv.No. Rs. 11,174/- 105/4.3.03 Indigenous meter/noise 165/20.3.03 meter
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2. The reason given by the Commissioner (A) is that the said item was not used for manufacture of final products under Rule 2(g) and Rule 2(b) of Centvat credit Rules, 2002. It is the contention of the appellant that these goods are required to be treated as capital goods and they are eligible for the cenvat credit in terms of Tribunal ruling rendered in the case of Sukhmal Steel & Metal Industries Ltd. v. Collector wherein the following items were considered as capital goods; water cooled capacitors, induction coil/magnetic yoke, DC choke, assembly wiring of testing of 1500 KW inner from cubide, auxiliary control panel, double break isolator, cooling channel, water cooled cables and HV switchgear/circuit breaker. The appellant is also relying on the larger bench judgment rendered in the case of Shri Ramakrishna Steel Industries Ltd. v. CCE, Madras wherein sand moulds were considered as being used in final products and credit has been extended including on chemicals or resin used in preparation of sand moulds. Reliance is also placed on Indian Seamless Steels & Alloys Limited wherein modvat credit has been extended on Foundry fluxes, refractories, wires and cables, raming mass, transformer, thermocouples, hoses, beams & angles, tubes & pipes, EOT cranes, material handling system, process controlling instrument, control panels, mono block pumps, ladle & ladle shrowd, slide gate well block, refractory bricks and briqmettes, sub entry nozzles, regulator panels, check meter, controller terminals, mod controller, etc., pipe scrape and beams, pressure indicator, and parts for metallurgical spares and chemical analysis equipment. Reference is also made to the larger bench judgment of the Tribunal rendered in the case of Bajaj Auto Limited v. CCE, Pune in which the larger bench relied on CBEC circular issued in 1998 allowing modvat credit on tool kits, which are supplied along with the motor vehicles and their value has already been included in the value of motor vehicles.
3. The learned Representative submits that the issue is covered by all these citations. He submits that the present items under consideration is
(i) Digital Multimeter & Insulation Resistance Tester (Megger)
(ii) Vibration meter/noise meter He submits that these items are essential for transformers and without it the transformers cannot function. He refers to the write-up given by the Senior Manager (QA) of the appellant who has given a detailed opinion that without these items, the transformers cannot function.
4. The learned SDR submits that the citations are clearly distinguishable. He further submits that these items were independently invoiced and they cannot be considered as part of the transformers. Hence, they have no role to play in the manufacture of transformers and credit cannot be extended.
5. On a careful consideration, I notice the opinion given by Sr. Manager (QA), which is extracted here below.
EXPLANATION The role of TELK is to design, procure parts, manufacture, carryout tests as per national international Standards, transport, erect at site, commission and guarantee satisfactory performance as required by customer.
The power transformer consists of the following systems.
(A) Magnetic system (Silicon steel core & parts)
(B) Conducting system (Copper conductor windings)
(C) Insulation system (Cellulose paper & press board)
(D) Cooling system (Radiator, fan, heat exchanger)
(E) Protection system (Accessories like Buchholz relay,
Pressure Relief Device etc)
(F) Condition Monitoring system (Accessories like Megger, Vibration
meter/noise meter, tan delta
meter, DGA set etc)
Integration of the above 6 systems make one power transformer. The above system are designed and provided in line with the specification of customer. All those items are procured and assembled and tested in the presence of customer, in accordance with National/International Standards. Then the final product is released for dispatch. At site this transformer is reassembled and tested using these Megger and Noise level meter.
The item (F) Condition Monitoring System is of two types.
(i) On line Condition Monitoring System.
(ii) Off line Condition Monitoring System.
In the on line system, those accessories are integral mountings on each unit so that the monitoring activity is continuous. In the off line system, they are occasionally monitored. The Power transformer is the costliest item in a substation (almost 50% of the total cost) and the outages are very costly for the customer. Hence the customer specifies the condition monitoring system depending upon their 'importance factor'. This selection is arrived at considering the importance given to a transformer connected to the grid by the end user. For example for a transformer in important station (like load despatch, grid control centres etc) the customer will invest more to have an on line system. Otherwise to reduce the overall cost customer limits this as off line, so these accessories kept separately.
Both those accessories monitor the healthiness of the internal conducting, magnetic and insulating systems of the power transformer and are inevitable for its guaranteed and expected performance.
In terms of the above opinion, the integration of six systems makes one power transformer. The six systems are designed and provided in line with the specifications of the customers. It has also been clarified that they are essential for the functioning of the power transformers. It is also seen from the grounds of the appellant that the transformers cannot be said to be the final product unless it is tested. For the purpose of testing and certification, the item in question is very essential and they have to be treated as part of the transformer. The ratio of the cited judgments clearly applies to the facts of the case, therefore the impugned order is set aside and the appeal is allowed.
(Pronounced and dictated in open Court)