Calcutta High Court
Commissioner Of Central Excise Cal.Ltd vs M/S.I.C.I.(India) Ltd on 15 June, 2010
Author: Mohit S. Shah
Bench: Mohit S. Shah, Sengupta
CEXA No. 3 of 1998
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Customs) Central Excise
And Gold (Control)
Original Side
COMMISSIONER OF CENTRAL EXCISE CAL.LTD. Appellant
Versus
M/S.I.C.I.(INDIA) LTD. Respondent
For Appellant : Ms. Mamta Bhargava, Advocate
For Respondent : Mr. Aniruddha Chatterjee, Sr. Advocate with
Mr. Arindam Banerjee and
Mr. B.Boral, Advocates
BEFORE:
The Hon'ble CHIEF JUSTICE MOHIT S. SHAH
AND
The Hon'ble JUSTICE SENGUPTA
Date : 15th June, 2010.
THE COURT : This appeal under Secton 35G(3) of the Central Excise Act, 1944 is directed against the judgment dated 24th February 1997 of the Customs Excise & Gold (Control) Appellate Tribunal, Eastern Bench, Calcutta in Appeal Nos. E-223 and E-224 of 1995 (Cal).
CEXA 3 of 1998 2
The following questions of law were formulated when the Revenue filed the Reference appliction/Appeal before this Court :-
"1. Whether the Tribunal was justified in allowing the modvat credit when there were certain registration restrictions for availment of modvat credit on capital goods under Rule 57Q of Central Excise Rules 1944 so far as material handling equipments are concerned prior to the amendment of the said Rule on 16-3-95 the alleged items were in fat used in the factory, for lifting raw materials from one place to another, and as such, they were not covered by the definition of capital goods under Rule 57Q upto 15-3-95 ?
ii) Whether the modvat credit can be availed of by the respondent on the basis of the judgment relied upon by the Tribunal while passing the order pertained to the post amendment period while the instant case relates to the period prior to the amendment on 16-3-95, therefore, the ratio of the judgments of the Tribunal is not applicable to the instant case ?"
Under Rule 57Q of the Central Excise Rules 1944, as applicable at the relevant time, the assessee availed credit on capital goods and utilised the credit towards payment of duty on final product and submitted a declaration on 24th March, 1994 describing material CEXA 3 of 1998 3 handling equipment as one of the capital goods under Rule 57T of the said Rules. Accordingly on 2nd May, 1994 the assessee received Hydraulic hand pallet truck in their factory as capital goods and took credit of a duty of Rs.82,997/- on 19th May, 1994. The goods in question, that is, hydraulic hand pallet truck was used for carrying goods including raw materials from one place to another within the factory premises. The Assistant Commissioner, Central Excise took the view that since handling equipment are not used for producing or processing any goods or for bringing about any change in the substance for the manufacture of final produce, the goods in question, that is, hydraulic hand pallet truck, cannot be considered as capital goods within the meaning of explanation to Rule 57Q of the Rules. Hence Modvat credit under section 57Q cannot be given for the hydraulic hand pallet truck.
Aggrieved by the above order of the Assistant Collector of Central Excise, Serampore Division, Calcutta, the assessee preferred an appeal before the Collector (Appeals), Central Excise, Calcutta who held that handling of raw materials for the purpose of transferring raw materials from the warehouse to the processing vessels or to move semi-finished goods from one stage of operation to the next stage is integrally connected with the process of manufacture. The CEXA 3 of 1998 4 Collector (Appeals), accordingly, held in favour of the assessee and further held that credit of duty paid on such capital goods used by the assessee for the manufacture of specified goods should have been allowed in terms of Rule 57Q of the Rules.
Aggrieved by the above decision, the Revenue went in appeal before the Tribunal. After hearing the learned departmental representative of the Revenue and learned advocate for the respondent-assessee, the Tribunal affirmed the judgment of the Collector (Appeals) and held that modvat credit scheme is beneficial in character and a broader view should be taken and not a narrow view, as was contended by the Revenue. Accordingly, the Tribunal dismissed the appeal.
Aggrieved by the above decision of the Tribunal, the Revenue has come up in this appeal under section 35G(3) of the Central Excise Act, 1944.
Ms. Mamta Bhargava, learned counsel for the appellant- Revenue submitted that the Tribunal erred in relying upon several decisions which were rendered on the basis of Rule 57Q prior to its amendment with effect from 16th March, 1995. However, the amendment to Rule 57Q with effect from 16th March, 1995 made a significant change to the definition of capital goods in Explanation (1) CEXA 3 of 1998 5 to Rule 57Q and, therefore, the Tribunal erred in relying upon the pre-amendment judgments. Learned counsel vehemently submitted that the hydraulic hand pallet truck in question was not used for producing or processing of any goods or for bringing about the change in substance for the manufacture of final products but was used merely for transporting raw materials or semi-finished products from one place of the factory to another and, therefore, the Tribunal substantially erred in law in widening the definition of the capital goods and in expunging the definition of capital goods beyond clearly the statutory language employed in Rule 57Q.
On the other hand, learned counsel for the respondent- assessee has supported the judgment of the Tribunal and countered the argument based on the amendment to Rule 57Q with effect from 16th March, 1995 by contending that no amendment was made to the definition of capital goods in so far as the present controversy is concerned. It is submitted that the Tribunal did not rely on clauses
(d) and (e) of the amended definition but merely interpreted the definition of capital goods as given in Explanation to Clause (a) of Rule 57Q of the Rules.
The definition of capital goods in the Explanation to Rule 57Q prior to amendment reads as under :
CEXA 3 of 1998 6
"(1) 'Capital goods' means -
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c) moulds and dies, generating sets and weigh-bridges used in the factory of the manufacturer."
After the amendment also with effect from 16th March, 1995, clauses (a), (b) and (c) of the definition did not undergo any change whatsoever and only additional clauses (d) and (e) were inserted which do not have any bearing on the controversy involved in the present appeal.
It is necessary to note that the definition of capital goods refers to machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods and it has not used the expression used in producing or processing of any CEXA 3 of 1998 7 goods. The words, 'for producing has a much wider import than the expression used "in producing". Reliance is placed on several decisions of Tribunals which are fully justified. In Commissioner of Central Excise vs. M.M.Forgings Ltd. reported in 1997(89) ELT 617, fork lift used for transport of raw materials and finished goods from one place to another was treated as eligible for modvat benefit when use thereof was shown for the manufacture of final product. Similarly, in Collector of Central Excise, Meerut vs. Nova Udyog Ltd. reported in 1996(88) ELT, 532, cranes used for movement of raw materials were given the benefit of modvat credit. Similarly, in Collector of Central Excise, Meerut vs. Mansurpur Sugar Mills Ltd. reported in 1996(87) ELT 91, cane unloader was given the benefit of modvat credit under Rule 57Q. The learned counsel for the Revenue has submitted that the aforesaid decisions of the Tribunals would not be binding on this Court. True it is, that the decisions of the Tribunals by themselves would not be binding on this Court but we find no justification why we should not adopt reasons different from the reasons of the Tribunals rendered in matters which were appealed from the orders of Tribunals. Learned counsel for the Revenue was also given an opportunity to point out any other CEXA 3 of 1998 8 decision of any High Court or of any Tribunal taking a contrary view from the one taken by the Tribunal in