Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs S.S.P.E. Cotton Mills P. Ltd. on 21 November, 2003
Equivalent citations: 2004(92)ECC246, 2004(175)ELT796(TRI-CHENNAI)
JUDGMENT Jeet Ram Kait, Member (T)
1. This appeal by revenue is directed against Order-in-Appeal No. 82/2001 (CBE) (GVN) dated 27.4.2001 by which the Ld. Commissioner (Appeals) has held that the full width grinding roller, carding accessories stand and rectifying bed as accessories for the carding machine and allowed them the modvat credit.
2. The revenue has come in appeal on the ground that this machine is used only for the maintenance of the carding machine. It was also the grievance of the revenue as not the usage of full width grinding roller, carding accessories and rectifying bed as it was clear that these impugned items were not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products and as such the impugned items were not covered under the definition of capital goods under Rule 57Q whereas the Commiissioner (Appeals) has held that the above machines are entitled to capital goods credit as the same have been used in or in relation to the manufacture of final product.
3. Heard Ld. DR Shri C. Mani who during the hearing held on 26.9.2003 and 21.11.2003 submitted that since it has been held as accessories by the Ld. Commissioner (Appeals), accessories are not parts of the carded machine and he therefore, argued that no modvat credit can be given on accessories as they are not capital goods.
4. Consultant Shri Balagopal submitted a photo (in original) of the machine which it was found by the Bench that this is a complete machine and their integrated parts of the machine do not appear to be prima facie accessories and so the matter was referred to the department for giving factual report whether they are parts and accessories. The department has given a report vide their letter C. No. IV//2/593/2003 Review dated 13.10.2003 signed by the Deputy Commissioner of Central Excise. The revenue confirmed that the cylinder, doffer and flats are part of the carding machinery. Consultant submits that since they are parts of the carding machine and carding machine is used for the manufacture of silver which is ultimately used for the manufacture of their final product i.e. cotton yarn. He therefore, submitted that these being parts of the carded machine, modvat credit on these capital goods cannot be denied and the Commissioner (Appeals) by stating them, though as accessories, has righly decided the admissibility of the modvat credit on such products. He therefore, submitted that the appeal filed by the revenue may be dismissed by sustaining the order of the Commissioner (Appeals).
5. I have considered the submissions made by both sides and since in the matter of CCE v. Sudarshanam Spinning Mills Ltd. and Ors. we have vide Order No. 919 to 927/2003 dated 4.11.2003 have held that modvat credit is available on capital goods which are used in the manufacture of combed/cotton yarn known as silver which is ultimately used in the manufacture of cotton yarn which is their final product and on which duty is paid. Para 8 of this Bench order is extracted herein below:
8. We have carefully considered the submissions made by both the sides. The only issue that arises for our dtermination in all these appeals is whether Modvat credit of duty paid on the capital goods/inputs which are used for manufacture of the final product viz. cotton yarn and during the course of which intermediate product viz. combed/carded cotton, also known as sliver, emerges, is admissible or not. Examining this question, we observe that Rule 57R(2) envisages that credit of specified duty allowed in respect of any capital goods shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of duty of excise leviable thereon or chargeable to nil rate of duty, provided that such intermediate products are specified as final products in Annexure to Rule 57Q. The objection of the revenue is that carded/combed cotton/silver are classified under heading 52.02 with effect from 21.10.94 vide Notification No. 60/94 and since the capital goods were received in the factory prior to 21.10.94, the assessee is not entitled to the benefit. We find that in similar circumstances, the Larger Bench in the case of Ballarpur Industries Ltd. 2000 (116) ELT 312 (LB) has held that the fact that Clause (d) covering 'inputs used as fuel for generation of electricity' under explanation to Rule 57A was introduced with effect from 16.3.95 cannot automatically lead to the conclusion that prior to that date input used for generation of electricity will not be entitled to modvat credit. Rule 57R(2) makes it clear that intermediate products have come into existence, cannot be a reason to vary or deny benefit of modvat credit on the capital goods, provided that final product is dutiable. In the instant case, admittedly the final products viz. cotton yarn is chargeable to duty. In the background of the fact that intermediate products did emerge and emergence of such intermediate product cannot vary or deny the benefit of credit in respect of the capital goods, as provided for under Rule 57R(2) just because such intermediate products have been included on a later date, cannot lead to a conclusion that prior to the date of inclusion, the benefit of credit cannot be given. So far as the marketability of the intermediate product in question is concerned, it is now well settled that the goods in question are not marketable. Further the Central Board of Excise & Customs have also issued clarification given by the CBEC vide Circular No. 665/56/2002-CX dated 25.9.2002 to the effect that modvat credit cannot be denied on capital goods, used in intermediate products exempt from duty under the new set of rules. Para 2 & 3 of the said circular are extracted herein below:
"2. The matter has been examined by the Board. It is observed that although there is no provision in the existing Cenvat Credit Rule, 2002 corresponding to erstwhile for 57R(2), the new rules have no provisions barring the credit on capital goods used in the manufacture of exempt intermediate product. Simultaneously the use of these capital goods in the overall manufacturing process of finished dutiable goods is not in dispute.
3. It is therefore, clarified that Cenvat Credit should not be denied on the capital goods used in manufacturing of intermediate product exempt from payment of duty which are used captively in the manufacture of finished goods chargeable to duty."
6. In view of the above discussion and settled legal position, I allow the modvat credit on parts of carded machine as the carded/combed cotton is used in the manufacture of the cotton yarn which is the final product. I, therefore, reject the appeal filed by the revenue by sustaining the order of the Id. Commissioner (Appeals). Ordered accordingly.