Customs, Excise and Gold Tribunal - Delhi
Commissioner Of Central Excise vs Modipon Fibres Co. on 20 May, 1997
Equivalent citations: 1997(96)ELT674(TRI-DEL)
ORDER
S.K. Bhatnagar, Vice President
1. This is a department's appeal against the order of Commissioner (Appeals), Ghaziabad dated 15-4-1996.
2. Ld. DR stated that M/s. Modipon Fibres Co., Modinagar were disallowed Modvat credit on following items by the Assistant Commissioner hold-ing that these goods cannot be considered as capital goods in terms of Rule 57Q of Central Excise Rules, 1944 :-
(i) Insert Air Filter;
(ii) Industrial Switch;
(iii) Spare Neoprene Rubber;
(iv) Spares for Process Control;
(v) Temperature Censors;
(vi) Cartridge Filter;
(vii) Industrial Filter;
(viii) Poroplate Air Quench Panel;
(ix) Industrial Filter Elements;
(x) Grinding Stone Set;
(xi) Glue Cartridge;
(xii) Libra Accessories (weighing scale).
3. The Commissioner (Appeals) allowed the party's appeal partly by allowing Modvat credit on all the above mentioned items except on Temperature Censors, Industrial Filter elements (components of D.G. set and libra Accessories (weighing scale) observing as under :-
"As regards credit under Rule 57Q on temperature censors and industrial filter elements (components of D.G. Set) and libra accessories (weighing scale) I found that the same was not admissible for the relevant period as the provisions for allowing credit on these items were incorporated vide Notification No. 11/95-C.E. (N.T.), dated 16-3-1995 and the credit relates to prior to 16-3-1995. As regards credit on remaining other items it is noticed that the defence reply to show cause regarding use of items was not controverted by the adjudicating authority, therefore contentions of the appellants are acceptable."
4. It was the department's contention that the Commissioner (Appeals) has outrightly allowed the credit without going into the merit of the case and without considering as to whether these goods qualify to be capital goods in terms of Explanation (1)(a) to (1)(c) to Rule 57Q of Central Excise Rules, 1944. Under the explanation appended to the rule the capital goods have been defined.
5. A perusal of explanation as it stood during relevant period would reveal that the capital goods were categorised in two classes as under :-
A. One class of capital goods are those which are used directly for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products and the components, parts and accessories of such capital goods as mentioned in Clauses (1)(a) and (1)(b) of explanation to Rule 57Q. They satisfied the above condition.
B. The other class of capital goods are those which have been specified under the explanation and are admissible to credit if they have been brought and used in the factory of manufacturer for their respective use. Such capital goods have been described under explanation Clauses (1)(c), (1)(d) and l(e) of Rule 57Q subject to the provisions and restric-tions thereunder.
6. Since the period involved in the instant case is prior to 16-3-1993 therefore, the eligibility for allowing Modvat credit on the goods in question has to be decided in accordance with the Clauses (1)(a), (1)(b) and (1)(c) of explanation to Rule 57Q only. There are following items with their uses in the factory of manufacturer on which Modvat credit has been allowed by the Commissioner (Appeals):-
________________________________________________________________________ Description of Goods Use _________________________________________________________________________
1.Insert Air Filter Air Filter for quench air used in nylon spinning.
2.Industrial Switch Air Filter for quench air used in polyester spinning.
3.Spare Neoprene Rubber Valves for controlling flow diaphragm demineralized water in D.M. Water Plant.
D.M. water is used in different manufacturing processes.
4.Spares for process control Power cylinder of Thermax Boiler Equipment for steam generation for use in different manufacturing processes.
5.Cartridge Filter Component of filter for nitrogen filteration.
6.Industrial Filter Component for filtering air used in polyester spinning machines.
7.Poroplate Air Quench Panel Component for Nylon Spinning machine air supply system.
8.Grinding Stone Set Tools for grinding of rubber
and used in D.T. Machine through
Glue Cartridge which the yarn passes at the
draw twisting stage.
7. From the uses of the items mentioned at Serial No. 1 to 7 it is clear that these goods are used for manufacturing and processing air, nitrogen, water and steam, the auxiliary products, which are exempted from payment of Central Excise duty. In view of provisions of Rule 57R(2) Modvat credit of such goods used in manufacturing or processing of exempted goods is not admissible. As such the above mentioned goods are not eligible for allowing Modvat credit. Further, the goods mentioned at Sr. Nos. 8 & 9 above are used for grinding of rubber rollers to be used in draw twisting machines and not for manufacturing of the final products as required under Explanation l(a) of Rule 57Q as such these are also not eligible for allowing Modvat credit.
8. Furthermore, all the above items are neither machines, machineries, equipments, etc. being used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product as specified under Clause (1)(a) of explanation to Rule 57Q nor these are components, accessories or spare parts of such machines, machineries etc. as specified under Clause (1)(b) of explanation to Rule 57Q and also these are not covered by the goods specified under Clause (1)(c) of explanation to Rule 57Q, therefore, these are not eligible to be considered as capital goods for availment of Modvat credit in terms of Rule 57Q. Furthermore, the goods used in manufacturing or processing of auxiliary goods required for manufacturing of final product Modvat credit will not be available on such goods in terms of Rule57Q.
9. This view is also supported with the fact that most of the goods in question are covered by the goods specified under Clause (d) of explanation to Rule 57Q added by Notification No. 11/95-C.E. (N.T.), dated 16-3-1995 which were added to the list of capital goods w.e.f. 16-3-1995 which means that these goods were not covered by the definition of capital goods prior to 16-3-1995.
10. In view of the above, the order-in-appeal dated 15-4-1996 is not maintainable to the extent of granting relief to the party, as such it is required to be set aside.
11. Ld. Counsel stated that the ld. Collector (Appeals) was justified in passing the order as the goods in question were capital goods in terms of Rule 57Q and they had furnished a list showing the use of the above goods in their unit whereas the Assistant Collector had not dealt with the issue squarely and had not controverted their submissions. Furthermore he would like to draw attention to the Tribunal's orders in the case reported in 1996 (86) E.L.T. 498 and l996(86)E.L.T.501.
12. I have considered the above submissions. I observe that the department's grievance is justified inasmuch as the ld. Collector has not examined the matter in depth and merely allowed the appeal solely on the ground that at the A.C. level the submissions were not contradicted. This was not sufficient. The ld. Collector was required to examine the position w.r.t. each item and the relevant provisions of law. This was necessary because 57Q is applicable to finished excisable goods of the description specified in the an-nexure for the purpose of allowing credit only if such capital goods have been permitted to be cleared under Rule 57-S, subject to the provisions of this section and the conditions and restrictions as the Central Government may specify in this behalf; And furthermore, for the purpose of this section capital goods means the items of the type described under Rule 57Q under any of the Sub-clauses of the explanation to Sub-rule (1) and which satisfy the conditions of Sub-rule (2).
13. Ld. Counsel has correctly drawn our attention to the Tribunal's order in the case of 1996 (86) E.L.T. 498 and 1996 (86) E.L.T. 501. But both these orders cover specific items and only go to show that each item has to be considered on its own merits in the light of the Rule 57Q and related provisions as they stood during the relevant period. In view of the above position, the impugned order is set aside and the matter remanded to the Collector for passing a speaking order in the light of above observations after granting an opportunity of being heard to the other side.