Customs, Excise and Gold Tribunal - Tamil Nadu
Cheran Spinners vs Cce on 23 January, 2004
ORDER Jeet Ram Kait, Member (T)
1. This appeal filed by the Revenue is directed against the order in Appeal No. 229/2002-A(ADK)(CBE) dated 13.11.2002 passed by the Commissioner of Central Excise (Appeals), Trichy by which he has allowed the appeal of the assessee holding that plastic crates used for carrying cops within the factory of the assessee are eligible for Modvat Credit.
2. The brief facts of the case are that the assessee-respondents are engaged in the manufacture of cotton flax yarn, viscose staple fibre yarn and polyester fibre yarn & poly viscose blended yarn falling under Chapter 52 & 55 of the CETA, 1985. They are also availing the facility of Modvat credit on capital goods as per Rule 57Q of the Rules. During the month of October 1999, they have availed credit of Rs. 9,840/- on the item"plastic crates" falling under sub-heading 3923.90 in their RG 23C Part II. The department was of the view that since this item does not fall under the term "capital goods under Rule 57Q,they are not eligible for the benefit of Modvat Credit. Show cause notice was therefore issued to the assessee which culminated in the order of the original authority whereby he has disallowed the benefit. The assessee went on appeal before the lower appellate authority who by the impugned order allowed the benefit relying the judgment of the Hon'ble Supreme court in the case of CCE Vs. Jawahar Mills reported in (2002-TAXINDIAONLINE-87-SC-CX) and the Tribunal decision in the case of Parle Beverages Ltd. Vs. CCE reported in 2000 (124) ELT 803. Aggrieved by the said decision the Revenue has come in appeal.
3. Shri C Mani, learned JDR appearing for the Revenue referred to the grounds of appeal and submitted that the item, "Plastic Crates' falls under heading 3923.90 which does not fall under any of the headings listed under Rule 57Q at the relevant time. In the case of Parle Beverages Ltd. Vs. CCE reported in 2000 (124) ELT 803 the eligibility of plastic crates was decided in favour of the assessee as inputs since they are used as packing materials for the transportation of the finished goods whereas in the present case the item "Plastic crates" are not used as packing materials but as used for carrying semi finished cops from one department to other within the spinning mill and are not capital goods. The learned JDR therefore prayed for allowing the Revenue appeal.
4. Heard Shri Bethanasamy, learned Consultant for the respondents-assessee. He has referred to the grounds taken in the Cross Objection filed by them wherein inter alia it is stated that though the item fall sunder chapter 39, it is an accessory to the main machines in the sense that in the continuous process of manufacture of yarn it is used for transferring the cops from spinning to reeling without the use of bigger baskets at any state. He has submitted that manufacture o final product is not possible without the use of Plastic crates and therefore it is an essential item. The item is also a container for handling the yarn. The plastic tubes, plastic cones and plastic bobbins on which the yarn is wrapped is also a container. the item with full cops are transferred to cone winding, doubling, auto coner sections in trollies. he has also referred to the various decisions such as (i) 2000 (123) ELT 770 (ii) 2001 (132) ELT 71 (iii) 1997 (96) ELT 354 (iv) 1998 (101) ELT 131 and (v) 1998 (102) ELT 281.
5. I have considered the submissions made by both the sides and gone through the case records and perused the various decisions cited. I observe that the benefit of Modvat credit in respect of "Plastic crates" has been denied to the assessee on the ground that the item does not figure in the items listed under Rule 57Q at the relevant time. The nature of the item and the use to which it is put by the assessee is not disputed by the Revenue. The Commissioner (Appeals) has noted that the item is in the form of material handling equipment which plays the role of carrying the intermediate semi-finished products for the next manufacturing activity. The cops coming out as an out-put from the machinery cannot be held by any other way except to collect it through these plastic crates as otherwise, it will lose its form. The lower appellate authority has relied upon the decision in the case of Pitti Laminations Ltd. Vs. CCE reported in 2001 (135) ELT 1015 wherein it has been held that Fork lift so long as there are used for shifting of materials from are place to another within the factory during the course of manufacture of the final product is to be considered as capital goods in support of his view. The further finding reached by the lower appellate authority reads as under :
"The use of plastic crates for transferring cops from spinning to cone winding, doubling, auto coner or from spinning to reeling is very essential. In spinning, plastic crates are used either on specially designed dotting trollies or customs built carriers mounted on dofting rails. The plastic crates with full cops are transferred to cone ending, doubling, auto coner sections in trollies. These plastic crates are essential in the manufacture of final products. If they are not used, the manufacture of final product is not possible. The material handling equipment has been held in the earlier decisions of the Tribunal to be used for producing or processing of goods and hence eligible for credit. The Hon'ble Supreme Court in the case of CCE Vs. Jawahar Mills Ltd. reported in, 2002-TAXINDIAONLINE-87-SC-CX, has held that the goods specified in explanation 1 (c) for avialing modvat as capital goods need not be used in the manufacture of final products the only requirement is that they should be used in the factory production. In the case of Parle beverages Ltd. Vs. CCE reported in 2000 (124) ELT 803 (T) the Hon'ble Tribunal has held that the plastic crates used for transporting the bottles of aerated waters are eligible for modvat Credit. So the appellant's case is covered by the above laws"
6. I observe that in the present case, the plastic crate is not one of the items specified under Rule 57Q as capital goods. What the Hon'ble Supreme Court in the case of Jawahar Mills (supra) has held was that the goods specified under explanation 1(c) to Rule 57Q need not be used in the manufacture of final product for availing the benefit under Rule 57Q. In the present case the item Plastic crate is not one of the items specified under Rule 57Q as capital goods. Hence the said decision in my opinion odes not help the assessee. In the case of Parle Beveragees vs. CCE (Supra) plastic crates were decided in favour of the assessee as inputs, and not capital goods, since they were used as packing material for the transportation of the goods.
7. The respondent-assessee have taken a ground in the cross objection that even if plastic crates are not considered as capital goods the same may be considered as packing material and in view of the fact that plastic crates and used for transporting only semi--finished goods and the benefit may be allowed.
8. I not that the Tribunal in the case of CCE, Vs. Machino Plastic Ltd. reported 2001 (132) 71 has held that Iron & Steel Trollies are material handling equipments for producing or processing of goods and eligible for credit under Rule 57Q though the said judgment has held that material handling equipments cannot be considered as inputs for the purpose of Notification No. 217/86-CE. Further, the Tribunal in the case of Grasim Cement Vs. CCE, Raipur reported in 1997 (96) 354 has held that Bucket Elevator Pipes and Tubes/Ducts/Metal bellows Screw are nothing but material handling equipment or parts thereof and hence admissible for the benefit of Modvat Credit under Rule 57Q. I further find that the Tribunal in the case of Larsen and Tubro Ltd. reported in 1998 (101) ELT 131 has held that material handling equipments such as wagon loader, fork lift trucks, conveyor systems and EOT crane are capital goods as they are integrally connected with the process of manufacture of the final product since transfer of raw material and some finished goods from one place to another could not be achieved by manual operation. In the present case, it is not in dispute that the manufacturing process of the respondents-assessee is not possible without the said item viz. Plastic crates and item is integrally connected with the manufacture of the final products. Following therefore, the ratio of the above noted decisions, I am of the considered opinion that Plastic crates cannot be considered as inputs, and are to be considered as material handling equipment and are therefore, eligible for benefit of Modvat Credit under Rule 57Q. In view of my discussion, I am of the considered opinion that the Modvat Credit is admissible to the item "Plastic crates" in terms of Rule 57Q. I. therefore, uphold the impugned order and reject the appeal of the Revenue. The Cross objection filed by the respondent also stands disposed of accordingly.