Customs, Excise and Gold Tribunal - Hyderabad
Jay Engg. Works Ltd. vs Cc And Ce on 29 September, 1999
Equivalent citations: 2000(90)ECR685(TRI.-HYDERABAD)
ORDER S.L. Peeran, Member (J)
1. In all these appeals common questions of facts and law are involved and hence they are taken-up together as per law.
2. The question that arises for consideration in these appeals is as to whether modvat credit on inputs for regulators can be utilised for paying duty on the Regulators. The appellants contention is that during the relevant period, semifinished regulators without knobs and cover plates were received from job workers. They had sent the inputs which are modvatable to the job worker under Rule 57F(2)/57(3) for the purpose of carrying out certain activities on these knobs removed to the job worker. The job worker did not produce a fully finished regulators but returned the same in semi-finished condition under the same challan procedure. Appellants had further carried out activities on these semi-finished regulators and fixed the knobs and cover plates and made it into a fully finished regulator and quality tested by Quality Control Department. Their contention is that the activities carried out by them at their place resulted into a fully finished regulator and therefore at the time of clearing the same on full payment of duty, they are entitled to take modvat credit in respect of inputs used in the manufacture of it. This was denied by the department by issuing show cause notice. The contention of the department is that the job worker had brought into existence fully finished product and what they removed was a fully finished product. However, the Commissioner in the impugned order has not taken into consideration the earlier order passed by the Commissioner (Appeals) in their own case and also the Tribunal judgements which.were in their favour.
3. Arguing for the appellants, Ld. Counsel submits that the issue is now fully settled by the Tribunal Judgment and the latest being that the Himadri Electrics Pvt. Ltd. as in wherein the Calcutta Bench has taken into consideration the earlier Judgment rendered in the case of Electro Flame as in and that of Jalan Containers Manufacturing Corpn. as and has held that regulators being indispensable part of Electric fans are entitled for the benefit of modvat credit.
4. Ld. advocate points out that the Commissioner has overlooked the fact that appellants had cleared the semi-finished item which was modvatable item to job worker under Rule 57F(2) and job worker having returned the same without bringing into a fully finished product and without having paid full duty. He submits that Commissioner has overlooked the fact of further activities carried out by the appellants in their own premises and also their having paid full payment of duty on the regulators.
5. Ld. DR Shri S. Kannan disputes the points raised by Ld. Counsel and submits that in terms of impugned orders, the job worker had returned the fully finished regulators and therefore appellants cannot taken modvat credit at their end in respect of inputs used. He refers to the declaration of classification list wherein they had declared that they are manufacturers of regulators as final product but in fact this was not the correct fact and it was the job worker who was the manufacturer. He submits that no evidence has been placed by the appellants with regard to fixing of knob and covers and there is no mention in the impugned order.
6. Countering this point, Ld. Advocate at this stage points out to the letter dt. 3.4.1991 addressed to Range Superintendent informing about the activity carried out by them at their place and fixing knobs and covers on the regulators and carrying out the test to make it into a fully finished product. He submits that they had filed a revised application under Rule 57F(2) and the same was accepted and permission granted on 21.5.1990.
7. Ld. Advocate also submits that even activity of testing and affixing the name plates to the fans should be construed as activity of manufacture in terms of Apex Court Judgment in the case of Jay Engg. as in wherein the Apex Court had held that name plates affixed to the fans should be considered to be a component irrespective of the fact that fans are already manufactured and fully assembled and even it functions without affixing the name plate, as fans do not become marketable without the name plate affixed on the same. On this principle, the benefit of notification No. 201/79-CE was granted. He submits that this Judgment cannot be considered by this Bench in the case of Electroflame by granting modvat credit on the regulators.
8. Ld. DR points from the impugned order that this plea of affixing cover plates & knobs on regulators is not a plea raised before the authority and is only an afterthought and no evidence was produced.
9. Ld. advocate points out to the facts on record in the form of correspondence and the manufacture was carried by them and submits that in any event the duty was paid by the appellants on the regulators in full at their point and therefore they are entitled to the benefit of modvat credit.
10. On a careful consideration of the submissions, we notice that the impugned order is required to be set aside for the following reasons:
Appellants were clearing the inputs to the job worker under Rule 57F(2) which is not disputed. The same have been returned to the appellants in semifinished form and the appellants have fixed knobs and the cover plates and tested the same and thereafter cleared the same on full payment of duty by the appellants in packed condition. Therefore the fact that the job worker has not paid the duty and duty was paid by appellants in full after making certain activities cannot be simply brushed aside. The modvat credit is required to be taken only after the final product has come into existence fully a finished form and the time put into at the stage of fully finished goods. Appellants had declared in the classification list that they are going to manufacture regulators. Thereafter, the duty paid inputs were cleared to the job worker under Rule 57F(2) and received back after certain activities. Further activities were carried out and thereafter duty paid by the appellants. In that view of the matter the plea taken by the Commissioner that the activity of job worker has brought fully finished product into existence is not acceptable in the light of the evidences produced by the appellants. The Commissioner has brushed aside these evidences as an afterthought is not a correct finding. The Tribunal has held already that modvat credit is required to be extended to the regulators when used in the final product i.e. electric fans. The same proposition is required to be applied when parts are going into the manufacture of regulators. The modvat credit is required to be extended to the inputs used in the manufacture of regulators in the light of judgements cited. We notice that in the case of Electroflame supra the Tribunal noted the Apex Court Judgment in the case of CCE v. Jay Engineering Works Ltd. as in wherein affixing of name plate was held to be an essential activity to bring into existence a fan as fan cannot be marketed without the name plate affixed on the fans. Appellants activity of affixing knobs and covers and testing the same has brought into existence a fully finished regulator and thereafter they had removed on full payment of duty. Hence modvat credit is required to be extended. In overall facts and circumstances and also taking into consideration that presently, as Counsel submits, the modvat credit is being extended by the department to the regulators and also for the earlier period, the Commissioner (Appeals) has allowed in their cases, certified copies of the order are already placed on record, therefore the impugned orders are set aside and appeals allowed.
(Pronounced & dictated in open court).