Customs, Excise and Gold Tribunal - Delhi
Commr. Of C. Ex. And Customs vs Tarun Castings (P) Ltd. on 1 June, 2000
Equivalent citations: 2000(120)ELT377(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. This reference application is filed by the Collector of Central Excise with regard to the final order No.A/688 & S/268/98-NB (SM), dated 12-6-1998 of the Tribunal. The issue involved in the appeal was whether transformers were eligible to modvat credit under Rule 57Q of the Central Excise Rules as 'capital goods' prior to 16-3-1995. It was decided by the Tribunal that transformers were so eligible even prior to 16-3-1995.
2. It has been contended in the reference application that prior to 16-3-1995, transformers were not eligible for modvat credit under Rule 57Q, Transformers were included as eligible 'capital goods' vide notification No. 11/95-C.E.(NT), dated 16-3-1995 and that this amendment did not have retrospective effect. Therefore, duty paid on transformers could not be allowed as modvat credit on capital goods prior to 16-3-1995. It has also been submitted that prior to 16-3-1995 in terms of Rule 57Q, only items used for producing processing or bringing about any change in any substance for the manufacture of the final product were eligible for modvat credit. Transformer is an electrical item used for the purpose of stepping up and stepping down the voltage of electric current, it is not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of the final product. Therefore, it was not eligible for credit. It has also been mentioned that Central Board of Excise & Customs had clarified vide F. No. 172/2/94-CX.4, dated 5-7-1994 that Modvat credit on transformers was not admissible prior to 16-3-1995. It has also been pointed out that the CEGAT in the case of CCE, Chandigarh v. Jay Enn Castings Limited 1997 (95) E.L.T. 81 (Tribunal) had clearly held that procedures prescribed under the Rules/Board's Circulars/Tariff Advices or Collector's Trade Notices are meant to be followed. Reliance has also been placed on the decision of the Tribunal in the case of CCE v. Shanmungraja Spinning Mills (P) Ltd. 1997 (89) E.L.T. 84 wherein it was held that definition of capital goods in Rule 57Q is restrictive and relates to goods used for production, processing or for bringing about any change in any substance for the manufacture of final product which meant that the goods must have a nexus with the actual process or bringing about any change in the substance of the goods by direct participation in the manufacturing stream.
3. In the light of the above submissions, the reference application urges that the following issue may be referred to the Honble High Court of Rajasthan at Jaipur :-
"Whether modvat credit under Rule 57Q can be allowed by the Tribunal on "Transformer" even prior to 16-3-1995, i.e. as on 3-3-1995, when the definition of 'capital goods' did not cover transformers ?"
4. Opposing the reference application, it has been submitted by the learned counsel for the assessees (M/s Tarun Castings) that prior to 16-3-1995 also, capital goods meant machines, machinery, plant equipment, apparatus, tools or appliances and that all capital goods used by the manufacturer in his factory were eligible for modvat credit under Rule 57Q. Reliance has also been placed on the decision of the Larger Bench of this Tribunal in the case of Jawahar Mills Ltd. 1999 (108) E.L.T. 47 wherein the Tribunal held that electrical items like wires and cables, control panels, exhaust fans, EOT cranes etc. are eligible for modvat credit under Rule 173Q. Reliance has also been placed on the decision of the Tribunal in 1999 (35) RLT 273 (Tri.) and 1998 (97) E.L.T. 127 (Tri.).
5. I have considered the submissions made by both the sides. The issue involved has remained contentious for a long time and differing decisions have been rendered by various authorities including the Tribunal. This has been noted in the final order itself. I also find that recently in the case of Collector of Central Excise, Jaipur v. DLF Cement Ltd., a Division Bench of this Tribunal has referred the very same issue to the Hon'ble Rajasthan High Court vide referral order No. R/89/2000-NB(DB), dated 5-5-2000. The reference made is as under :-
"Whether electric distribution equipment such as transformers, cables, fuses and electric motors and parts which may not be themselves be used for producing or processing or for bringing about any change in any substance in the manufacture of the final product but without which, having-regard to the modern technology such production or processing of goods for manufacture of final product is not possible, are capital goods within the meaning of Clause (a) to the Explanation of Rule 57Q as it stood at the relevant time."
6. As the issue has remained contentious and differing orders have been passed by various authorities including the Tribunal and as the issue remains already referred to the High Court, I allow this reference application and refer the following issue to the Hon'ble Rajasthan High Court at Jaipur :-
"Whether modvat credit under Rule 57Q can be allowed by the Tribunal on "Transformer" even prior to 16-3-1995, i.e. as on 3-3-1995, when the definition of 'capital goods' did not cover transformers ?".