Customs, Excise and Gold Tribunal - Delhi
Birla Vxl Ltd. vs Commissioner Of Central Excise on 17 October, 1997
Equivalent citations: 1998(99)ELT452(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The issue for determination in this appeal arising out of the order passed by the Commissioner (Appeals), Central Excise, Chandigarh is the eligibility of Deltamoist Portable Digital Moisture Meter and spares used by the appellants herein for measuring percentage of moisture regained at various stages in the processing of textiles such as woollen fabrics, man-made fabrics, etc., to the benefit of Modvat credit under Rule 57Q of the Central Excise Rules, 1944 - the Department has denied credit of Rs. 10,144/- on the ground that the item is neither used for producing or processing any goods or for bringing about any change in any substance for the manufacture of the final product and is, therefore, not capital goods within the meaning thereof as contained in Clause (a) of the Explanation to Rule 57Q(1).
2. I have heard Shri R. Sudhinder, learned Advocate and Shri Y.R. Kilania, learned DR and carefully considered their submissions.
3. The item in question is in the nature of testing instrument as it is used for testing moisture during the spinning of yarn for the purpose of producing high quality yarn. It also controls the moisture level during spinning operations which is very necessary as any excess or reduced moisture during spinning can gives rise to quality control problem and result in waste.
4. As rightly pointed out by the learned Counsel, the process of measuring and testing of various inputs has been considered to be an essential process in completion and manufacture of certain final products and Modvat credit has been held to be available in respect of such inputs. In the case of Geep Industrial Syndicate Ltd. v. CCE, Allahabad reported in 1996 (88) E.L.T. 753, items such as electrically heated muffle furnace used for testing of raw materials and ampere meter and volt meter used for measuring and testing finished goods have been held to be eligible to credit under Rule 57Q of the Central Excise Rules, 1944. In the case of Modi Xerox Ltd. v. CCE, Meerut - Final Order Nos A-410-411/97-NB, dated 29-5-1997, credit has been extended on thermo-hygrograph used for maintaining uniform temperature and humidity in the coating room of photoreceptor drums which are parts of photocopying machines, on the ground that if such temperature is not maintained, the process of coating cannot be completed and, therefore, thermo-hygrograph is integrally connected with the production activity of the manufacture. The Bench has referred to an earlier order in the case of CCE, Meerut v. Modi Xerox against which a reference application was filed by the Department and rejected [as seen from 1997 (90) E.L.T. 214 (Tribunal)], noting the judgment of the Hon'ble Gujarat High Court in the case of Industrial Machinery Manufacturers P. Ltd. v. State of Gujarat reported in (1965) XVI Sales Tax Cases 380 (Gujarat) wherein it was held that humidifiers in cotton textile mills play an important role in the manufacturing process as they provide a particular humidity without which yarn will not acquire proper strength, etc. The Gujarat High Court applied the test that the other item of machinery which has a use in the manufacture of finished goods and without which manufacture of finished goods would not be possible, would be machinery used in the manufacture of finished goods. I also find that in the case of Avi Photo Chem Ltd. v. CCE, Pune reported in 1997 (20) RLT 331 densito meters which are instruments used for testing density of chemicals to ensure that they are of required strength and position, have been held to be capital goods in terms of Rule 57Q and entitled to credit in terms thereof.
5. The decision of the Tribunal in the case of Collector of Central Excise, Coimbatore v. Shanmugaraja Spinning Mills P. Ltd. reported in 1997 (89) E.L.T. 84 cited by the learned DR, in which it has been held that humidification plant cannot be considered as equipment for producing or processing any goods or for bringing about any change in any substance for the manufacture of final products, and hence not eligible to credit under Rule 57Q, does not take note of the judgment of the Hon'ble Gujarat High Court cited supra. Further in the case of Modi Xerox - Final Order Nos. A/410-411/97-NB, dated 29-5-1997, the Tribunal has distinguished the case of Shanmugaraja Spinning Mills on the ground that, in that case, the creation of atmosphere by the humidification plant was not having any nexus for bringing about any change in the substance of the goods, while without the use of thermo-hygrograph, the process of coating of photoreceptor drums was not practicable. In the present case it was not disputed that the process of manufacture of different types of fabrics and yarn by the appellants is not practicable or possible without checking of the moisture content with the help of the disputed item - Deltamoist Portable Digital Moisture Meter. Accordingly, following the ratio of the earlier judgments of the Tribunal and also taking into consideration the findings of the Hon'ble Gujarat High Court, I hold that the item in dispute in this case is covered by the definition of capital goods contained in Clause (a) of the Explanation to Rule 57Q, set aside the impugned order and allow the appeal.