Customs, Excise and Gold Tribunal - Tamil Nadu
Dalmia Cements (B) Ltd. vs Cce on 27 August, 2007
Equivalent citations: 2007(123)ECC249, 2007(149)ECR249(TRI.-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants are cement manufacturers. They had taken Modvat credit on various items including (a) Truck loading machine with control panel, belt conveyors and bag divertors; (b) H.B. Chart and (c) Calibrator during the period March to August 1994. The lower authorities disallowed the credit taken on the above three items and ordered recovery of Rs. 6,25,341/-. Hence the present appeal.
2. After examining the records and hearing both sides, I note that the credit in question had been taken at the early stage of the capital goods credit scheme, when "capital goods" had the following definition under Rule 57Q(1) of the Central Excise Rules, 1944:
'Capital goods' means:
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing, processing of any goods or for bringing about any change in any substance for the manufacture of final product;
(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
3. The first item viz. 'Truck loading machine with belt conveyers and bag divertors' was used for diverting, conveying and loading fully packed product [cement in bags] on to trucks. This position is evident from the MATERIAL FLOW CHART produced by learned Counsel as also from the write-up produced by him. The write-up, however, says that, without the truck loading machine, the automatic packing machine cannot function and therefore the truck loading machine with control panel, belt conveyers and bag divertors is integrally connected to the automatic packing machine.
4. In other words, it is contended that the truck loading machine had a function which was integrally connected with packing of cement, the last stage of manufacture. The MATERIAL FLOW CHART also shows a wagon loading machine. On the one hand, bags of cement are conveyed to the truck loading machine from the bag diverter and the truck loading machine loads the cement bags on to trucks. On the other hand, bags of cement are conveyed from the bag divertor to the wagon loading machine and the latter loads the goods on to railway wagons. Apparently, the truck loading machine and the wagon loading machine function identically. The appellants have not claimed capital goods credit on the wagon loading machine, nor is there any material on record to indicate that such credit was allowed to them by the department. If that be so, the appellant cannot claim similar benefit on the truck loading machine and accessories thereof. Both these machines have post-manufactural function. It is not in dispute that the manufacture of cement comes to an end in the packing machine. The truck loading machine and the wagon loading machine are used only for handling fully manufactured cement out of the factory. According to the definition of capital goods, only those machines, machinery, plant, equipment, apparatus, tools or appliances which were used for "producing, processing of any goods or for bringing about any change in any substance in the manufacture of final product" were eligible for Modvat credit during the period of dispute.
5. The above machines are not in this category inasmuch as they were used for a purpose subsequent to completion of manufacture [including packing] of cement. Hence capital goods credit would not be admissible to the first item. The decision of this Bench in Thiru Arooran Sugars Ltd. v. CCE, Tiruchirapalli cited by learned SDR supports this view. In that case, capital goods credit was held to be inadmissible to bag stacker which was a shelf arrangement in which bags filled with sugar duly stitched and labelled are stacked before removal from the factory. Bag stacking was found to be a post-manufactural activity.
6. 'HB Chart' is an item made out of paper and paperboard and the same monitors and records the function of the plant based on which the production of cement is controlled. This position has been accepted by the lower authorities also. Hence I do not see any reason why it should not be held that HB Chart was used by the appellants during the period of dispute for the production of cement. The same is the case with 'calibrator' which calibrates the pressure transmitted through various machineries while they are functioning. The write-up says that, in case of any deviation in the process parameter, the calibrator will give signal to the monitor for automatic correction. In case such correction is not made, the calibrator will stop the machinery from functioning. The lower authorities have not disputed this nature of function of calibrator. The item must be held to have been used for the manufacture of cement. It would therefore follow that capital goods credit is admissible to HB Chart and Calibrator.
7. In the result, the appeal is allowed to the extent of allowing capital goods credit on HB Chart and Calibrator only. The impugned order shall stand modified to this effect.
(Dictated and pronounced in open court)