Customs, Excise and Gold Tribunal - Delhi
Jaypee Bela Plant vs Commissioner Of Central Excise on 28 March, 2003
Equivalent citations: 2003(161)ELT422(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these two appeals filed by M/s. Jaypee Bela Plant, arising out of a common Order-in-Original No. 378-380/2002, dated 15-5-2002, the issue involved is about the eligibility of certain items to Modvat credit under Rule 57Q of the Central Excise Rules, 1944.
2. Shri V. Lakshmikumaran, learned Advocate, submitted that the Appellants manufacture cement and avail of Modvat credit of duty paid on the inputs and capital goods; that the Commissioner, under the impugned Order has disallowed the Modvat credit on certain capital goods during the period from August, 1996 to November, 1997 on the ground that the capital goods are used in the mines and that some of the goods are not covered under the definition of capital goods under Rule 57Q during the relevant period. We also heard Shri V. Valte, learned Senior Departmental Representative for Revenue. The submissions made by both the learned Advocate and the learned Senior Departmental Representative and our findings are as under :-
3. Dumper, Hydraulic Excavator, etc. 3.1 The learned Advocate submitted that the dumper is used for transportation of limestone from the mines to their factory; that the Modvat credit has been denied on the ground that transfer of limestone from the mines to the manufacturing plant in the dumpers has got nothing to do with the manufacture of the final product; that in terms of Rule 57Q, the Credit is allowed if the capital goods has been used in the factory of the manufacture; that the dumpers have been used in the factory as the crusher is installed at the factory and the dumpers bring the limestone from the mines to the factory and unload the same in the crushers; that thus the condition in the Rule, regarding the use of the capital goods in the factory of the manufacturer is satisfied; that in the case of Jaypee Rewa Plant v. Commissioner of Central Excise, Raipur, the Tribunal vide Final Order No. A/86-87/2002-NB, dated 8-1-2002 has allowed the credit on the dumpers. Reliance has also been placed on the decisions in Malabar Cements Ltd. v. Commissioner of Central Excise, Cochin, [2002 (149) E.L.T. 751 (T) = 2002 (48) RLT 828 (CEGAT)] and ACC Ltd. v. Commissioner of Central Excise, Raipur - 1999 (108) E.L.T. 169 (T).
3.2 As regards, button bit hydraulic excavator and drilling machine, the learned advocate submitted that these are used in captive mines; that it has been held in the case of Commissioner of Central Excise v. Rajasthan State Chemical Works, 1991 (55) E.L.T. 444 (S.C.) that the transfer of raw material is integrally connected with the process of manufacture; that it has been held in the case of Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, 1965 (XVI) STC 259 (Supreme Court) that mining activity is connected to the manufacturing process and the two processes are interdependent; that thus the mining and the manufacturing activity are interconnected and without excavation of limestone, the final product cement would not be manufactured; that accordingly the capital goods used in the mines have to be construed to have been used in the factory of the manufacturer.
3.3 The learned Senior Departmental Representative, reiterated the findings of the Commissioner as contained in the impugned Order in which it has been mentioned that Dumper is an equipment for bringing limestone from the mines to the factory and is not used in the factory; that it has been held by the Tribunal in Vikas Industrial Gas v. Commissioner of Central Excise, Allahabad, 2000 (118) E.L.T. 257 that Modvat credit is not available in respect of pump set installed at the Reservoir outside the factory, for delivering water through the pipe line to the factory; that thus the manufacturing processes do not extend to procurement of raw material. The learned Senior Departmental Representative further, mentioned that the Supreme Court has held in the case of Jaypee Rewa Cement v. Commissioner of Central Excise, M.P. 2001 (133) E.L.T. 3 (S.C.) that in the view of the provisions of Rule 57Q, the Appellant is not entitled to relief. He finally submitted that the hydraulic excavators, etc. have been used in the mines and not in the factory of the Appellants and applying the ratio of the decision of the Supreme Court in Jaypee Rewa Cement, the Modvat Credit under Rule 57Q is not available in respect of button bit, hydraulic excavator and drilling machine.
4.1. We have considered the submissions of both the sides. Rule 57Q of the Central Excise Rules, 1944 allows the Modvat credit of the duty paid on the capital goods used by the manufacturer in his factory. It is admitted fact that button bit, hydraulic excavator and drilling machine are used by the Appellants in mines and not in their factory. Thus following the ratio of the judgment of the Apex Court in the case of Jaypee Rewa Cement, 2001 (133) E.L.T. 3 (S.C.), the Appellants are not eligible to take Modvat credit of the duty paid on these goods as the same are not used in the factory.
4.2 We find that dumper admittedly brings the limestone from the mines to the factory. It is thus apparent that dumper is not used in the factory. Merely because the dumper transports the raw material into the factory premises, it cannot be claimed by the Appellants that the same is used by them in their factory. The specific requirement of Rule 57Q, as interpreted by the Supreme Court regarding use of capital goods in the factory, is not satisfied. It is not the case of the Appellants that the dumper is used in the factory as material handling equipment. The ratio of the decision in the case of Rajasthan State Chemical Works is not applicable as in the said matter the power was used for pumping of brine into the salt pans or lifting coke and lime stone in the factory and in view of this, the Court held that power was used in or in relation to manufacture. The decision in the case of Malabar Cements Ltd., supra, is also not applicable as it was submitted by the Appellants therein that "mine was also included and declared as factory as per the plan submitted to the Department and the Registration Certificate issued by the Department." In the case of ACC Ltd. v. Commissioner of Central Excise, Raipur, which was also followed by the Tribunal in Malabar Cement case, dumper and loader were used for shifting and handling of raw materials inside the Appellant's factory. We thus hold that Modvat credit under Rule 57Q is not available to the Appellants in respect of the duty paid on dumper.
5. Galvanised Steel Structure The learned Counsel mentioned that the Commissioner has disallowed Credit in respect of galvanized steel structure, as the same has been used in the structure foundation for setting up of the 13 KVA Sub-station; that steel structure is required to have a ground clearance of 20 to 30 feet as per the Indian Electricity Rules. We agree with the findings of the learned Commissioner that structural foundation is in the nature of shed/platform of civil work and is not covered within the definition of capital goods under Rule 57Q. Accordingly, the Modvat credit is not available in respect of galvanized steel structure as it is neither spare part nor component nor accessory of machine/machinery.
6. Platform Canopy Sheet According to the Appellants, Bag House is installed as Air pollution control equipment; that bag house contains special quality of bag filters which separates the dust particles; that bag house is a fabricated equipment which contains various items, i.e. casing, hopper, top roof, canopy, inlet and outlet plenum, bag holding plates, various platform and stairs; that canopy shed is a part of bag house equipment. We however, find force in the submissions of the learned Commissioner that the impugned goods is nothing but a platform, fabricated out of MS flats and structural steel covering entire area of bag house and thus it is a civil structure. Under capital goods, credit is not available in respect of civil structures. Accordingly, the Appellants are not eligible to the Modvat credit under Rule 57Q.
7. Light fittings It has been contended by the Appellants that as the entire cement plant is spread over a vast area with a continuous manufacturing process running round the clock, illuminating all plant is essential as working during night hours cannot be carried out and cement cannot be manufactured without the area being illuminated; that these light fittings are specially designed for industrial use and Modvat credit is available. We do not find any substance in the submissions. Light Fittings are neither any machine, machinery or equipment which is used in producing or processing any goods or for bringing any change in substance for the manufacture of the final products. The light fittings are not capital goods as per the definition given in Rule 57Q of the Central Excise Rules and as such no credit of the duty paid on such light fittings is allowable to the Appellants. However, the matter is remanded to the Adjudicating Authority to examine the submissions of the Appellants that the amount of duty involved is Rs. 1,16,945/- and not Rs. 1,69,945/- disallowed by the Commissioner in the impugned Order.
8. Closed Circuit Television System (CCTV) and Printer trolleys The learned Advocate submitted that the closed circuit Televisions are installed in the production area namely kiln sintering zone and grate cooler area to enable the operators to monitor the burning zone area of kiln like flame, clinker size during the production process; that thus the CCTVs are essential to monitor the manufacture of final products. On the other hand, the Adjudicating Authority has denied the Modvat credit on CCTVs on the ground that these are not used in producing or processing of any goods or for bringing about any change in the manufacture of final products. We agree with the submissions of learned Advocate that CCTVs are eligible 'capital goods' as they take part in producing or processing of any goods because they are used to monitor the burning zone area of kiln. We accordingly hold that they are eligible to take the Modvat credit of the duty paid on CCTVs. However, the Modvat credit of the duty paid on the printer trolley is not available as printer trolley is used to keep printer and pages only; thus the same cannot be called 'capital goods' as defined under Rule 57Q of the Central Excise Rules, 1944.
9.1. Transformer The learned Advocate mentioned that the Modvat credit has been denied in respect of transformers on the ground that during the relevant period no credit was allowable on the transformers of the capacity of less than 75 KVA; that the transformers installed is of capacity 25/31.5 MVA and is used for stepping down the voltage to 130 KV to 6.9 KV so as to enable the running of the motors used in the cement plant; that the Adjudicating Authority has incorrectly assumed that the capacity of the transformers is 31.5 KVA which is not correct; that moreover the transformers are used for processing, producing of the goods and irrespective of the capacity, the Modvat credit is available. He relied upon the decision of the Tribunal in the case of Commissioner of Central Excise, Chennai v. Southern Petro Chemicals Industries Ltd., 2000 (118) E.L.T. 190.
9.2 We agree with the submissions of the learned Advocate that the Modvat credit is available in respect of the transformers as these are used for processing or producing of the goods. It has been held by the Supreme Court in the case of Commissioner of Central Excise v. Jawahar Mills Ltd., 2001 (132) E.L.T. 3 (S.C.); that the credit will be available in respect of any of the machine, machinery, plant, equipment apparatus tools or appliance if these are used for producing or processing of any goods or for bringing about any change in any substance in the manufacture of final products. We, therefore, allow the Appeal in respect of transformer.
10. Pakaged Air-Conditioners The learned Advocate submitted that the production and the entire factory is run based on a direct control system from where the entire operations of the production etc. are controlled and monitored; that the air conditioner is installed in the said room, where the computer system is installed, which is used for monitoring the production; that the said room requires continuous monitoring of the temperature for which the air conditioner is installed; that as the maintenance of the temperature is essential for the manufacture of the final products, they are eligible to avail of Modvat credit of the duty paid on air conditioners. He relied upon the decision in the case of Commissioner of Central Excise, Chennai v. Spic Pharmaceuticals Division, 2001 (138) E.L.T. 929, Commissioner of Central Excise v. Ispat Alloys Ltd., 2001 (130) E.L.T. 903 and Commissioner of Central Excise, Chennai v. Titan Industries Ltd., 2001 (136) E.L.T. 746. On the other hand, the Commissioner has disallowed the Modvat credit on the ground that Rule 57Q has specifically excluded Air conditioner system falling under Heading 84.15 of the Central Excise Tariff Act and also observing that Air Conditioners system has also been used in the office where the computers were installed.
10.2 Explanation to Rule 57Q defines 'capital goods'. During the relevant time, as per Explanation, Heading 84.15 was excluded from the definition of the capital goods. In view of the specific exclusion of Heading 84.15, the Air conditioners are not eligible for Capital Goods in respect of which Modvat credit can be taken by the Appellants.
11. Cable Trays and accessories ladders type Learned Advocate submitted that their main equipment namely coal stacker - reclaimer moves from one place to another on a rail track; that these are electrically operated machines which are used for screening of crushed limestone and coal; that to connect these machines with electricity, electrical cables are used; that further electric cables move along with these machines simultaneously; that the cables are laid down from the sub-stations to the coal stacker - reclaimer by means of cable trays; that the cable trays are treated as accessories of coal stacker reclaimer and as per the definition of the capital goods, credit is available. He also relied upon the decision of the Tribunal in the case of Commissioner of Central Excise, Chennai v. Texon Industries 2002 (51) RLT 347 (CEGAT), where the Modvat credit of the duty paid to Ladder Cable tray has been allowed by the Tribunal following the decision of the Larger Bench in the case of Jawahar Mills, 1999 (108) E.L.T. 47 (T) = 1999 (32) RLT 379; that the Supreme Court has also upheld the decision of the Larger Bench in the case of Commissioner of Central Excise v. Jawahar Mills, 2001 (132) E.L.T. 3 (S.C.).
12. We find force in the submissions of the learned Counsel. These impugned goods are accessories to the coal stacker - reclaimer as the cable is laid down with the help of these products which is required for operating the machines.
13. In view of the fact that the issue involved in the present Appeal is regarding interpretation of the term 'capital goods', we are of the view that no penalty is imposable on the Appellants. We therefore, set aside the penalty.
14. The appeal is disposed of in the above terms.