Customs, Excise and Gold Tribunal - Delhi
Lupin Laboratories Ltd. vs Commissioner Of C. Ex. on 3 March, 1998
Equivalent citations: 1998(60)ECC614, 1998ECR162(TRI.-DELHI), 1999(114)ELT867(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. By the impugned order, the appellants have been denied the benefit of Modvat credit as capital goods on cement and hardner, electrical equipments, electronic platform, scale, electrical weighing machine, spares, centrifugal fan, blower, pollution control equipments, static convertor, safety torch, FRP tank for HBR scrubber, vertical flame arrestor, cryocan container, cylinder, regulator, S.S. platform, Hepofilter, tower packings (Pall Rings), Bin (Tanks) and rupture disc. The total amount of Modvat credit denied on these items was of the order of Rs. 7,40,005.35.
2. Shri V. Sridharan, learned Advocate appearing for the appellants submits that the detailed functions of these items were explained to the lower authorities. He submits that he is not pressing Modvat credit on cement and hardner.
3. Insofar as electrical equipments are concerned, he submits that electrical equipments comprised of cables, printed circuit, motor control central panel, control box, distribution board/exhaust fan, starter panel etc. He submits that all these items are covered by the decisions of this Tribunal in the case of Commissioner v. Modi Xerox Limited [1997 (22) RLT 801], in the case of Grasim Cement Limited [1997 (96) E.L.T. 354, in the case of Jaypee Rewa Cement v. Collector [1997 (23) RLT 75] and in the case of Maihar Cements v. Collector [1997 (23) RLT 306]. He, therefore, prays that in view of the above case law, Modvat credit is admissible to them.
4. Regarding electronic platform scale, electrical weighing machine and spares, the ld. Advocate submits that weighing machines used for weighing raw materials etc. are covered by the decision of this Tribunal in the case of Modi Xerox Limited [1996 (88) E.L.T. 530] and further by the decision of this Tribunal in the case of Carborundum Universal Limited [1997 (93) E.L.T. 357].
5. Centrifugal fan and blower - the learned Counsel submits that these items are required for proper room temperature and working of the environment and are covered by the decision of this Tribunal in the case of Grasim Cement Limited [1997 (96) E.L.T. 354].
6. Static convertors - the learned Counsel submits that these items are covered by the decisions of this Tribunal in the case C.C.E. v. Bharat Paper Mills [1996 (86) E.L.T. 501], in the case of SRF Limited v. C.C.E. [1997 (96) E.L.T. 372] and in the case of Grasim Cement Limited [1997 (96) E.L.T. 354].
7. Safety Torch - the learned Counsel submits that safety torch on which Modvat credit has been denied as a flame proof torch and is required to check inside the reactor. He submits that it is an integral part of the equipment for the plant and, therefore, Modvat credit may be allowed on this item.
8. FRP Tank for HBR Scrubber - the learned Counsel submits that this item is used for storage of vapour of toxic/ hazardous solvents and is covered by the decision of this Tribunal in the case of Metrochem Industries v. C.C.E., [1997 (96) E.L.T. 114].
9. Vertical Flame Arrestor - the learned Counsel submits that this item is used to prevent entry of flame inside the storage tanks and thus is an intergral part of the plant and is eligible for Modvat credit under Rule 57Q.
10. Cryocan Container and Cylinder/regulator - the learned Counsel submits that these are a specially insulated storage tanks for liquid and are covered by the decision of this Tribunal in the case of Metrochem Industries v. C.C.E. [1997 (96) E.L.T. 114].
11. On the eligibility of Modvat credit on S.S. platform - the learned Counsel submits that this item is used to prevent vibration and damage to the machine and it is, therefore, part of the machine and eligible for Modvat credit under Rule 57Q.
12. Hepafilter - the learned Counsel submits that this item is used to prevent dust and bacteria to enter in the sterile area and, therefore, it is an intergral part of the machine and is covered by the decision of this Tribunal in the case of Grasim Cement Limited [1997 (96) E.L.T. 354].
13. Tower Packing (Pall Rings) - the learned Advocate submits that this item is used for purifying and recycling the solvents and thus, it is part of the plant for processing final product and is covered under Rule 57Q.
14. Bin (Tanks) - the learned Advocate submits these items are used for storage of solvement and are necessary for the manufacture of final products and, therefore, Bins (Tanks) are capital goods and are covered by the decision of this Tribunal in the case of Grasim Cement Limited [1997 (96) E.L.T. 354].
15. Rupture Disc - the learned Counsel submits that rupture disc is a kind of safety valve and is integral part of the machine and is covered by the explanation under Rule 57Q.
16. The ld. Advocate submits that the appellants were disallowed Modvat credit amounting to Rs. 55,538.30 on the ground that Modvat credit was taken on the original copy of the duty paying documents. He submits that this Tribunal in the case of Ganeshwar Sugar Mills Limited v. C.C.E., Meerut [1997 (92) E.L.T. 203] held that "On reading of Sub-rule (3) of Rule 57T, it is also clear that there is no emphasis of production of duplicate invoice, as there is mention only of the goods being received under the cover of invoice or a Bill of Entry. In absence of these documents, any assessee can produce any other document as may be specified under Rule 57G. In the present case, original invoice itself has been produced as a supporting evidence for loss of duplicate invoice. Therefore, there is no cause to hold that there is no provision in the Rules or about the non-satisfaction of the documents produced. The impugned orders suffer from an infirmity and is required to be set aside. In that event of the matter, the impugned order is set aside and the appeal is allowed." The ld. Counsel submits that this clearly shows that Modvat credit is admissible on original invoice and prays that their case was fully covered by the ratio of this Tribunal in the case of Ganeshwar Sugar Mills Limited.
17. The ld. Counsel submits that Modvat credit amounting to Rs. 72,639/- was disallowed because endorsed B/E was produced. He submits that this Tribunal has been allowing Modvat credit on the strength of endorsed Bill of Entry and that their case was fully covered by these decisions of this Tribunal.
18. Summing up his arguments, ld. Counsel submits that in view of the above submissions, their appeals may be allowed.
19. Replying to the arguments and contentions of the learned Advocate, Shri D.K. Nayyar, learned, JDR appearing for the Revenue submits that Explanation to Rule 57Q is most unambiguous as it stipulates that only such capital goods will be eligible for Modvat credit which are used for producing, processing, or bringing about any change in any substance for the manufacture of final products. The ld. JDR submits that only such goods which are used for any of the above three purposes will be capital goods under Rule 57Q. He submits that according to the principle of 'Noscitur a sodis', that is, the words are to be interpreted according to the company which they keep. He submits that this Tribunal in the case of Tractors and Farm Equipment Limited [1993 (68) E.L.T. 234] held that "The word 'drawings' is used in association with the words, 'works of arts'. According to the principle of interpretation of 'Noscitur a Sodis' is that the words are to be interpreted according to the company which they keep. Hence, the word "drawings" has to be interpreted in line with the meaning of the preceding phrase "Works of Arts" which would refer to the word 'Drawings' as used in Art and not the technical/engineering drawings." The ld. JDR submits that this finding of the Tribunal is most appropriate to the facts and circumstances of the present case and, therefore, only such goods which are used for producing, processing or bringing about any change in the substance used for manufacture of the final products will be capital goods under Rule 57Q. The ld. JDR further supports this argument by the decision of the Apex Court in the case of Rainbow Steels Ltd. v. Commissioner of Sales-Tax [1981 (47) STC 298] and in the case of Rangpur Tea Assciation Ltd. v. Commercial Officer [1991 (81) STC 376] .
20. The ld. JDR also submits that in the case of C.C.E. v. Shanmugaraja Spinning Mills Pvt. Ltd., [1997 (89) E.L.T. 84], the Tribunal held that "Humidification plant though helps in maintaining certain level of humidity to get the yarn of a particular quality but that by itself does not mean that it can be considered equipment for production, process or bringing about any change in the substance, hence not eligible to Modvat credit." He submits that in this case, the Tribunal had examined the words used in the rules namely, production, processing or bringing about any change in the substance to come to the conclusion. He also submits that most of the items on which Modvat credit has been denied are not used either in the process, producing or bringing about any change in the substance. He submits that safety torch is not an item of machine, plant, equipment etc. He submits that FRP Tanks for HBR Scrubber, Vertical Flame Aresstor, Cryocan Container and Cylinder/ Regulator, S.S. Platform, Hepafilter, Tower Packing (Pall Rings), Bin (Tanks) and Rupture Disc have either no role to play or function part of the structure or do not part take in the production, process or bringing about any change in the final products and, therefore, the lower authorities have rightly denied Modvat credit on these itmes.
21. Heard the submissions of both sides. We note that a lot of reliance was placed on the decision of this Tribunal in the case of Shanmugaraja Spinning Mills Pvt. Ltd. We also find that similar issue had come up for decision before the Hon'ble Gujarat High Court in the case of Industrial Machinery Manufacturers Pvt. Ltd. v. State of Gujarat [1965 (16) STC 360] wherein the Hon'ble Gujarat High Court held that "But we cannot agree with him when he says that Humidifiers are not used in the actual process of manufacture of cloth. Manufacture of goods means the process of converting raw materials into finished goods and whatever machinery is required for converting raw materials into finished goods would be machinery used in the manufacture of such goods. Every item of machinery which has been used in the manufacture of finished goods which plays some role in the process of manufacture of finished goods and when such manufacture of finished goods would not be possible, would be machinery used in the manufacture of such goods. Such machinery would be an essential and intergral part of the plant which manufactures finished goods and would certainly satisfy the description that it is machinery used in the manufacture of finished goods. If this test be applied, it is clear that humidifiers are machinery used in the manufacture of cloth." Thus, we find that the decisions of this Tribunal relied upon by the Commissioner in the case of Shanmugaraja Spinning Mills Pvt. Ltd. and in the case of Rainbow Steels Ltd. are overruled by the judgment of the Hon'ble Gujarat High Court in case of Industrial Machinery Manufacturers (P) Ltd. as indicated above.
22. We have examined the various items in the light of the findings of the Hon'ble Gujarat High Court. We find that except cement and hardner, safety torch and S.S. platform, all other items are the inputs inasmuch as without the use of these items it was not practicable for the manufacturer to manufacture the pharmaceutical goods. We further find that the appellants have also relied upon the Supreme Court's judgment in the case of Rajasthan State Chemicals Works [1991 (55) E.L.T. 444 (SC)]. We find in the judgment of the Supreme Court that the process itself may consist of several processes which may or may not bring about any change at every intermediate stage, but the activity or the operation may be so integrally connected with final result of the production of commorcially different article, therefore, any activity or the operation which is essential requirement and so related to the further operation for the end result would also be the processs in relation to the production to come within the meaning of process under Rule 57Q. In our view, the word 'process' in the context in which it appears under Rule 57Q includes an operation or activity or the process in relation to the production or producing the goods.
23. In drawing the distinction between the process and manufacture, the Hon'ble Supreme Court in the case of Delhi Cloth and General Mills [1977 (1) E.L.T. (J199) (S C.)] clarified that "To say this is to equate "processing to manufacture" and for this we can find no warrant in law. The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance", and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. In the instant case, we note that the position has been clarified by the Hon'ble Gujarat High Court in the case of Industrial Machinery Manufacturers Pvt. Ltd. cited above.
24. Having regard to the submissions made before us, we hold that Modvat credit will be admissible on all the items except cement, hardner, safety torch and S.S. platform.
25. Insofar as disallowance of Modvat credit on the original copy of duty paying document is concerned, we follow the ratio of the decision of this Tribunal in the case of Ganeshwar Sugar Mills Limited [1997 (92) E.L.T. 203].
26. Regarding disallowance of Modvat credit on the strength of endorsed bill of entry, we find that this Tribunal has been consistently holding that Modvat credit can be taken on the strength of endorsed Bill of Entry. Following the same, we hold that Modvat credit on endorsed Bill of Entry will be admissible to the appellants.
27. In view of the above findings, the impugned order is modified to the extent stated above and the appeal is disposed of accordingly.