Customs, Excise and Gold Tribunal - Bangalore
Cce vs Keltron Component Complex Ltd. on 27 January, 2005
ORDER S.L. Peeran, Member (J)
1. Revenue has filed this appeal against the OIA No. 68 to 70/03-CE passed by Commissioner (Appeals), Cochin. The Revenue had denied modvat credit in respect of plastic crates used in the manufacture of final products in terms of Rule 57AA of Central Excise Rules. The Commissioner after due analysis of the entire provisions of law in the light of the Apex Court judgment rendered in the case of Mehra Brothers v. Joint Commercial Officer has found that the plastic crates are necessary for the purpose of holding capacitors and resisters and they have to be treated as accessories or parts of machinery. The finding recorded by the Commissioner in para 5 to 8 are reproduced herein below.
5. I have gone through the grounds of appeal, the submissions made at the time of hearing and all other evidence on record. From the facts stated above it is seen that the appellants have received plastic crates in the factory on payment of duty of excise. They have taken credit to the extent of 50% of the duty paid as capital goods credit. The case of the appellants is that these goods are nothing but accessories to the machineries and therefore they are eligible for the credit.
6. In terms of Rule 57AA "capital goods" means
(i) all goods falling under chapter 82, Chapter 84, Chapter 85, Chapter 90 heading No. 6802 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act.
(ii) Components, spares and accessories of the goods specified at (1) above,
(iii) Moulds and dyes
(iv) Refractories and refractory material;
(v) Tubes and pipes and fittings thereof;
(vi) Pollution control equipment; and
(vii) Storage tank used in the factory of the manufacture of the final products, but does not include any equipment and appliances used in an office.
Under Clause (ii), accessories of the goods specified in Clause (i) are also capital goods. There is no dispute about the fact that the various machineries used for the production of capacitors and resistors etc., are those goods falling under Clause (i) (supra). Therefore, the only issue that needs to be determined is whether plastic crates are accessories to the various production machineries or not. The McGraw-Hill Dictionary of Scientific and Technical Terms defines accessory as-
a part, a sub-assembly or assembly that contributes to the effectiveness of a piece of equipment without changing its basic function, may be used for testing, adjusting, celebrating recording or other purposes.
The term accessory also came up for interpretation before the Supreme Court in the case of Mehra Brothers v. Joint Commercial Officer . In this context, it is necessary to refer to para 3 and 4 of the judgment, which reads as-
3. We find that the accessories used in the schedule to describe goods which may have been manufactured for use as an aid or addition. A sense in which the word accessory is used is given in Webster New International Dictionary as an object or device that is not essential in itself but that adds to the beauty, convenience or effectiveness of something else. Other meanings given there are : supplementary or secondary to something of greater or primary importance. Any of several mechanical devices that assists in operating accessories are not necessarily confined to a particular machines for which they may serve as aids. The same item may be accessory of more than one kind of instrument. Thus this Court accepted the meaning of the accessories as an object or device that is not essential in itself but that adds to the beauty or convenience or effectiveness of something else or is a supplementary or secondary to something of greater or primary importance which assist in operating or controlling or may serve as aid are accessories. The 'arc carbon' was held to be an accessory.
4. In Black's Law Dictionary, fifth Edition at p. 13 'accessory' has been defined as "anything which is joint to another thing as an ornament, or to render it more perfect, or which accompanies it or is connected with it as an incident, or as subordinate to it or which belongs to or with it, adjunct or accompaniment. A thing of subordinate importance. Aiding or contributing in secondary way of assisting in or contributing to as a subordinate.
The term accessory has also been the subject interpretation under various decisions of the Tribunal.
7. From the ratio of the decision of the Supreme Court as referred to above, it is seen that the goods which add to the convenience or effectiveness of something else or is supplementary or secondary to something of greater or primary importance which assists in operating or controlling or may serve as aid arc accessories. Thus a machinery may function without an accessory but the accessory adds to the convenience or its effectiveness. In the present case, it is seen that various machineries, namely, welding machines, capping machines, tapping machines, winding machines etc., are used for manufacture of capacitors and resistors. No doubt plastic crates, by themselves are not used for manufacture of capacitors and resistors. However, the plastic crates add to the convenience for collecting machine outputs and shifting to the next stage of production. Therefore, these plastic crates no doubt act to the convenience or its effectiveness and serve as aid for the various machines. While deciding the issue, the lower authorities have held that capacitors and resistors can be manufactured even without the use of these plastic crates and therefore they cannot be termed either as an accessory or as parts of machinery. The lower authorities failed and erred in understanding the meaning of the term, accessory. Accessories act as aid and not as parts which are essential for the manufacture and working of the machines. I am therefore of the opinion that plastic crates are nothing but accessories to the various machines used for the manufacture of capacitors and resistors by the appellants. The orders of the lower authorities are therefore not sustainable in law and need to be set aside.
8. Setting aside the Order-in-Original No. 53/2001 and 54/2001, both dated 31.12.2001 passed by the Additional Commissioner of Central Excise & Customs, Calicut and Order-in-Original No. 9/2002 dated 27.5.2002 passed by the Deputy Commissioner of Central Excise, Kanpur, all the appeals are allowed.
2. We have heard both sides in the matter and have examined the issue in the light of the provisions of Rule 57AA. We find that the Commissioner has correctly arrived at the conclusion and has rightly found that the plastic crates is a necessary accessory as these are required for effective handling of capacitors and resistors. We agree with the findings arrived at by the Commissioner (Appeals) and do find any substance in the revenue's appeals and the same are rejected.
(Pronounced and dictated in open Court).