Customs, Excise and Gold Tribunal - Delhi
Larsen And Toubro Ltd. vs Commissioner Of Central Excise on 25 March, 1998
Equivalent citations: 1998(101)ELT131(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. In this appeal against the Order-in-Original of the Commissioner of Central Excise, Raipur dated 20-2-1996, the appellants have challenged the denial of Modvat credit to the tune of Rs. 38,68,876/- on various items claimed as capital goods by the appellants.
2. The impugned order disposed of three SCNs relating to three different periods. There were six categories of items, namely, (a) Electrical/electronic Equipments and spares; (b) Refractories; (c) Material handling equipment; (d) Pollution control equipment/spares; and (e) Other Misc. Items.
3. Shri Prakash Shah, ld. Counsel, who appeared for the appellants submitted that the items under dispute are fully covered by the decisions of this Tribunal and accordingly, the impugned order is not sustainable in law. He prayed for allowing the appeal on the basis of the following case law relating to each of the items in dispute, namely,
(a) Electrical/electronic equipments and spares : Jaypee Rewa Cement v. CCE, Raipur, Final Order No. A/823/97-NB, dated 15-7-1997, 1997 (96) E.L.T. 167 (Tribunal).
(b) Refractories : Nova Iron and Steel Ltd. v. CCE, Final Order No. A/863/97-NB, dated 31-7-1997,1997 (96) E.L.T. 165 (Tribunal).
(c) Material handling equipment: CCE v. R.K. Marbles Ltd. -1997 (92) E.L.T. 276 (Tribunal) and 1991 (55) E.L.T. 444 (S.C).
(d) Pollution Control Equipment: IFFCO v. Union of India -1996 (86) E.L.T. 177 (S.C.) However, on other Misc. items ld. Counsel was not in a position to rely on any direct decision covering the said items.
4. Ld. JDR, Shri D.K. Nayyar, submitted that Explanation to Rule 57Q does not cover all capital goods but only those capital goods which have been subsequently mentioned in the Explanation after its amendment on 16-3-1995.
As to the criteria for allowing any item as capital goods under the Explanation of capital goods under Clause (d) he referred to the Tribunal decision in Collector of Central Excise v. Fourts (India) Laboratories Pvt. Ltd. [1997 (92) E.L.T. 231]. He also referred to the Apex Court decision in Mithelesh Kumari and Anr. v. Prem Behari Kheri reported in AIR (1989) S.C. 1247 as to the retrospective effect of fiscal statutes.
5. We have considered the submissions made by both sides. We find that the ld. Counsel for the appellants is right in his contention that most of the categories of items in dispute in this appeal have been covered by various decisions of this Tribunal.
6. (a) Electrical/electronic equipments/spares: the items mentioned under this category are :-
(i) Ecores kit mounted in electrical feeder for running of motor belt conveyors and blowers;
(ii) MMOO conductor mounted in electric feeder for operating actuators for flow control of gases;
(iii) Ammeter Relay used in electrical feeders for indicating current drawn and for protection of L.T. Motors.
(iv) electric capacitors used in control circuits for controlling electrical parameters; conductors used for closing power circuit for starting electric motors;
(v) PVC insulated cables used for transmission of electric power;
(vi) modules used in the feeders of L.T. motors for power control in Raw Mills and Cement Mill;
(vii) Spares for electric motors;
(viii) aluminium conductors for PVC power transmissions;
(ix) Electric motors used for raw material feeding belts, conveyors, blowers etc;
(x) Control cable used for controlling HT motor operation; and
(xi) S.C. fuses used in speed control panel for protection of semi conductor devices.
7. Commissioner had dis-allowed credit on the aforesaid items holding that these items were not used in the process of final product, namely, cement. We find that in Jaypee Rewa Cement v. CCE, Raipur, Final Order No. A/823/97-NB, dated 15-7-1997,1997 (96) E.L.T. 167 (Tribunal) this Tribunal had taken the view that since electrical items like cables etc. are covered by Chapter 85 and since these items have been included as eligible for Modvat credit as plant and machinery from 1-3-1997, there was no reason to hold that it was not capital goods for purposes of Rule 57Q even for an earlier period prior to 16-3-1995. This Tribunal had also in CCE v. Nav Bharat Paper Mills -1996 (86) E.L.T. 501 held that electrical transformer and electronic control panel boards used for regulating supply of electrical current to the machines were eligible capital goods even for the period prior to 16-3-1995. In CCE v. Nova Udyog Ltd. -1996 (88) E.L.T. 532, electrical wires and cables were held to be eligible capital goods. We find from the description of the various items mentioned under the category of electrical/electronic spares above, that these items are essentially for the proper working of the machinery used for production of goods. We therefore, hold that the 11 items mentioned above are eligible capital goods for purposes of Rule 57Q.
(b) Refractory Items The two items included under this category are fire bricks and "ACCMONLC - 90 CASTABLE" used for refractory lining of kiln. In CCE v. Raipur Alloy Steel Ltd. - 1995 (78) E.L.T. 444, the Tribunal had taken the view that refractory bricks were essential parts of furnace and are covered by the excluded category of Rule 57A. It was argued for the appellants that since refractory bricks were not inputs by reason of Explanation to Rule 57A, they were necessarily to be held as capital goods within the meaning of Rule 57Q. In Jindal Strips v. CCE, Final Order No. A/985/97-NB, dated 15-9-1997,1998 (98) E.L.T. 747 (Tribunal) the Tribunal had taken the view that in view of the Larger Bench decisions in Union Carbide v. CCE -1996 (86) E.L.T. 613 and Shri Ramakrishna Steel Industries Ltd. v. CCE - 1996 (82) E.L.T. 575 and other decisions following the ratio contained therein, and holding that the amendment to Rule 57Q dated 16-3-1995 was clarificatory in nature and would be applicable for a period prior to 16-3-1995, held that refractories would be modvatable items under Rule 57Q. The same view was reiterated in Nova Iron and Steel Ltd. v. CCE by Final Order No. A/863/97-NB. We accordingly hold that refractory bricks used as lining material in kilns would be eligible capital goods under Rule 57Q.
(c) Material Handling Equipment Appellants have claimed credit of duty paid on wagon loader, fork Lift truck, Warm Shaft used in conveyor gear box, locomotive, Technological structural parts, strings plates, Idlers, Spares for conveyor idlers, Polyester Polymide conveyor belting, Drive Pulley, Discharge chute, electric hoist, positive displacement twin lobe blower and EOT crane. Appellant have relied on the Apex Court judgment in CCE v. Rajasthan State Chemical Works -1991 (55) E.L.T. 444 (S.C.) to contend that the process of handling, lifting and transportation of raw material is a process in relation to manufacture if these processes are integrally connected with further operations leading to the manufacture of goods. Appellants have further submitted that handling of raw-material was an integrally connected process in the manufacture of cement as it is impossible to transfer such raw-material and semi-finished goods manually from one place to another without use of the said material handling equipment. We find that the Tribunal has in Jaypee Reiva Cement case (supra) held that conveyor system like conveyor belt are material handling systems and therefore a part of plant and machinery used in the process of brining about a change. The Tribunal had also in the said order held that EOT crane was a material handling equipment. Further/in CCE v. M.M. Forgings -1997 (89) E.L.T. 617 the Tribunal had held that Fork-lifts would be entitled to benefit of Modvat credit if it is shown that in the absence of Fork lifts the assessee would not be able to manufacture their final product. We also note that in CCE v. Uttam Industrial Engineering (P) Ltd. - 1996 (86) E.L.T. 498, it was held that EOT cranes used for moving parts of machinery in the production line would be eligible capital goods even prior to 16-3-1995. Having regard to the aforesaid decisions we hold that the items presently shown as material handling equipment would also be eligible for Modvat credit.
(d) Pollution control equipment Appellants have claimed Modvat credit on electrodes, Insulator Shafts, Insulators, Gas Distribution screen and Cooling tower as pollution control equipment and spares. Appellants have explained that these equipment, besides being used for preventing dust circulating in the air, are also used for collecting and recycling raw-material which go into the air. Cooling tower is used for reducing the temperature of hot gases for efficient performance of electro static precipitator which collects and recycles the raw material which go into the air. Therefore, it is claimed, these equipments are involved in the processing goods for the manufacture of the final products. They have contended that even re-cycled raw-material go into the manufacture of final product. However, from the description of the above items and their functions, we are unable to conclude that they discharge any function relating to pollution control nor have the appellants shown that the installation of these equipments are mandatorily required for purposes of pollution control. We, therefore, agree with the Commissioner that the equipments mentioned under the category of pollution control equipment/spares cannot be considered as equipments directly or integrally involved in the processing of any goods or manufacture of the final product. We, therefore do not find that any modification is called for in the impugned order in relation to these items.
(e) Misc. Items Appellants have claimed credit of duty paid on (i) non-metallic expansion joint mounted on Hot Air Ducts of raw-mills to provide flexibility for thermal expansion (ii) automatic sand bag marker used in metal detectors mounted on conveyor belts to prevent metal from entering raw mill, (iii) Self operated temperature controller used in cooling water line of raw mill gear box for controlling oil temperature, peizometer ring mounted on cooling fans of clinker cooler for air flow measurement, Thermo tracer used in hot air generator for pre-heating the fuel for easy flow and diaphragm bag for diaphragm pump for sample collector for analyzing the fuel gases in kiln. Collector had disallowed credit on the aforesaid items on the ground that the equipments were used for miscellaneous work and were not used in the manufacture of the final products. The appellants have contended that the items are ancilliary and the process involved are integral to the manufacture of the final product. From the functions as explained above, we do not find that these items are discharging functions integral or direct for the manufacture of the final product. We therefore agree with the findings of the Commissioner that the aforesaid items would be ineligible for credit as Capital Goods under Rule 57Q.
8. As regards the submissions made on behalf of the Department and reliance placed on the Tribunal Order in CCE v. Eourts (India) supra we do not consider that any departure from the considered views of the Tribunal as reflected in earlier decisions are called for.
9. Having regard to the above discussions, we modify the impugned order in above terms. Appellants will be eligible for consequential benefits in accordance with law in terms of our above findings.