Customs, Excise and Gold Tribunal - Bangalore
Malabar Cements Ltd. vs The Commissioner Of Central Excise, ... on 21 December, 2001
Equivalent citations: 2002ECR161(TRI.-BANGALORE)
JUDGMENT
G.A. Brahma Deva
1. This appeal arises out of and is directed against the Order-in-appeal No. 195/97 dated 28.5.97 passed by the Commissioner of Central Excise (Appeal), Cochin.
2. Shri Nambiar, appearing for the appellants in these cases submitted that in appeal No. 2178/97 whether 'dumpers' are eligible capital goods in terms of Rule 57Q to avail the modvat credit is an issue to be considered. He said that the dumpers are used for bringing blasted limestone from the quarry to the crusher. The transfer of raw material is a preliminary operation and a part of continuing process but for which the manufacture would be impossible. Handling of raw materials for the purpose of transfer is then integrally connected with the process of manufacture. Accordingly, the items i.e. dumpers which have taken part in the process of manufacture should be treated as capital goods in terms of Rule 57Q of the Central Excise Rule to avail modvat credit. He said that the very issue has already been considered by the Tribunal in the case of ACC Limited v. Commissioner of Central Excise, Raipur reported in 1999 (108) ELT 169. In that case, it was clearly held that dumpers used in the factory as material handling equipment is eligible capital goods in terms of Rule 57Q of the Central Excise Rules to avail modvat credit.
3. Smt. Radha Arun, appearing for the Revenue submitted that the ratio of the decisions in the case of ACC Limited, is not applicable to the facts of this case. In that case there was a clear finding that the dumpers were used within the factory as material handling equipment. In the present case, the mine is six and half kilometers from the factory. The dumpers were used to carry the lime stone from the mine to the crusher which is in the factory premises. The dumpers as such were not used in the factory. They were only used to carry lime stone from the mines to the factory. Factory is defined under the Factories Act (Section 2) 'the factory could mean a place where manufacturing activity is carried out and the precincts thereof also where the manufacturing activity is carried out.' She said that if the item was used as capital goods in the place of manufacturing activity, then only it is eligible as capital goods in terms of Rule 57Q. She said that precisely this was the view of the Tribunal in the case of Madras Cements reported in 1998 (99) 'ELT 395 and this view was affirmed by the larger bench in the case of Vikas Industrial Gases reported in 2000 (118) ELT 257 and Madras Cement was further followed in the case of Shree Cements reported in 2000 (132) ELT 254 while deciding the modvat on dumpers. She also relied upon the decision of the Tribunal in the case of CCE, Hyderabad v. India Cements [2000 (118) ELT 700] where modvat credit was disallowed on excavators and dumpers used in the mine, with the observations that mines are excluded from the precincts of the factory as defined under Section 2(e) of the Central Excise Act read with Section 2(m) of the Factories Act. She said that modvat on dumpers cannot be allowed since they were not used in the factory and nor used in the manufacturing process, which starts only when the raw material have been brought together in the factory.
4. Shri Nambiar replied that Department should not make out a new case at this stage since there was no charge that it was not used in the factory. As can be seen from the show cause notice and the respective impugned orders, modvat credit has been denied only on the ground that it is only a transporting vehicle for transport of raw materials and they are not used either in the production or processing of any goods or bringing about any change in any substance during the manufacture of the final product. He submitted that the Tribunal has held that unloader used for unloading cane was integral process in the manufacture of sugar and therefore, eligible to be considered as capital goods with the meaning of Rule 57Q { ACC Limited v. Commissioner of Central Excise, Raipur reported in 1999 (108) ELT 169Madras Cements reported in 1998 (99) 'ELT 395Vikas Industrial Gases reported in 2000 (118) ELT 257 and Madras Cement was further followed in the case of Shree Cements reported in 2000 (132) ELT 254 while deciding the modvat on dumpers. She also relied upon the decision of the Tribunal in the case of CCE, Hyderabad v. India Cements [2000 (118) ELT 700] CCE v. Mansurpur Sugar Mills [1996 (87) ELT 91]} following the decision of the Supreme Court in the case of Rajasthan State Chemical Workers [1991 (55) ELT 444] and further, Tribunal has taken a view in the case of Grasim Cements v. Commissioner of Central Excise [1996(96) ELT 354] that material handling machinery/ equipments would be eligible for modvat credit under Rule 57Q. He also referred to the decision of the Supreme Court in the case of Jaypee Rewa Cement [2001 (133) ELT 3] wherein it was held that inputs need not be utilized within the factory and Rule 57A does not, in any way, specify that the inputs have to be utilized within the factory premises. The explanation contained in Rule 57A is merely meant to enlarge the meaning of the word 'input' and does not in any way restrict the use of the input within the factory premises nor does the said Rule 57A require the inputs to be brought within the factory premises at any point of time. While countering the arguments the Department Representative submitted that Rule 57Q specifies that the goods should be used in the factory of hte manufacture of final products to avail credit as capital goods. Shri Nambiar said that apart from not charging that it was not used in the factory premises, the item was used within the precincts of the factory since mine was also included and declared as factory as per the plan submitted to the Department and the Registration Certificate issued by the Department. He also referred to the decision of the Tribunal in the case of Commissioner of Central Excise, Chennai v. Pepsico India Holdings Limited [2001 (42) RLT 800] wherein it was held that PVC pipes used for carrying water from a well owned by respondents and located at a distance of 200 Mts from the factory and the pipeline outside the factory is to be treated as extension of pipeline within the factory and therefore the entire pipeline is to be considered in the factory.
5. I have carefully considered the matter. In the instant case, modvat credit has been denied on the ground that dumper is only used as a transport vehicle for the transport of raw material and its function therefore is prior to the start of the manufacturing process According to the Department, they are not used either in the production or processing of any goods or bringing about any change in any substance during the manufacture of the final product. In the case of Rajasthan State Chemical Works (supra), the Apex Court had held that the process becomes a manufacturing process when it brings out complete transformation for the whole component so as to produce a commercially different article or a commodity. However, the process itself might consist of several processes which may or may not bring about any change at every intermediate stage. But the activities of the parts may be so integrally connected that the final result is the production of a commercially different article. Therefore, any activity or operation which is essentially required is so related to the further operation for the end result would also be a process in or in relation to manufacture. Further, the transfer of raw material is a preliminary operation and a part of continuous process for which the manufacture would be impossible. The handing of the raw materials for the purpose of such transfer is then integrally connected with the process of manufacture. The handling for the purpose of transfer may be manual or mechanic. Relying on the said judgment of the Supreme Court, the Tribunal had held that cane unloader for unloading the cane was integral process in the manufacture of sugar and therefore eligible, to be considered as capital goods within the meaning of Rule 57Q [Mansurpur Sugar Mills Ltd]. Further, the Tribunal in the case of Grasim Cement v. CCE, Raipur (supra) held that material handling machinery/equipments would be eligible for modvat credit under Rule 57Q. The Tribunal has also taken the same view in the case of Larsen and Toubro Ltd [1998 (101) ELT 131] that material handling equipments used for handling equipments used for handling material such as wagon loader, fork lift trucks, Conveyor systems and EOT crane will be capital goods as they are integrally connected in the process of manufacture of cement since such transfer of raw material and some finished goods from one place to another could not be achieved by manual operation. In view of these decisions it is clear that material handling equipment would be eligible for modvat credit under Rule 57Q. I find that ACC Limited (Supra) relied upon by the Counsel is on point at issue. On the other hand, case law referred to by the DR and observations made therein were in the context of admissibility of modvat credit under Rule 57A or denial of modvat credit on the ground item was not used within the precincts of the factory. There is a force in the arguments advanced on behalf of the party that at no stage it was charged that item in question was not used in the factory while denying the modvat credit. As can be seen from the Show Cause notice, and the orders passed by the authorities below, it was proposed to deny the modvat credit on goods mentioned at Annexure-I and II on the ground that the goods are not used in relation to the manufacture of the final product. It was also pointed out by the Counsel that in the instant case 'mine' is also covered under the 'factory' as per the certificate granted by the Department.
6. In the facts and circumstances, since the item was used in relation to the manufacture of the final product, I do not find any justification to disallow modvat credit on dumpers. In the view I have taken, appeal is allowed.
7. Ordered accordingly.
(Pronounced in open Court on 21/12/2001)