Customs, Excise and Gold Tribunal - Bangalore
Rittal India Pvt. Ltd. vs Commissioner Of Central Excise on 16 June, 2004
ORDER K.C. Mamgain, Member (T)
1. These (02) two appeals are filed by M/s. Rittal India Pvt. Ltd. Doddaballpur, against the respective Orders-in-Appeal passed by the Commissioner of Customs & Central Excise (Appeals), Bangalore.
2. Shri Ramasubramanian, learned Chartered Accountant appearing for the appellants pleaded that the issue involved in both the appeals is common, therefore he is making common pleadings for both the appeals. However in Appeal No. E/975/2002, he is also taking additional ground of time bar. He pleaded that the appellants are engaged in manufacturing electrical/electronic metal enclosures, industrial cooling equipment and their parts. The appellants during 1995-96 imported a paint plant falling under tariff heading 84.24 of schedule to Central Excise Tariff Act for manufacturing various products. They had filed relevant declaration under Rule 57T of Central Excise Rules and took credit of the amount paid as additional duties of customs. The factory construction commenced sometime in 1995 and the commercial production commenced in December 1997. After import of the paint plant, the appellants needed certain parts which were imported in several lots between February 1997 and January 1998 & between February 1998 and September 1998 as replacement of spares. He accepted that during the period in dispute, the paint plant was not eligible for Modvat credit. However, their claim is for Modvat credit on the parts and spares of paint plant and they accordingly had taken the credit which was denied by the Assistant Commissioner and on appeal by the Commissioner (Appeals).
3. The learned Counsel pleaded that according to Rule 57B(2), a manufacturer of the final product is denied to take credit of duty paid on the goods namely--
(i) machines, machinery, equipment, apparatus, tools, appliances or capital goods as defined in Rule 57Q (other than those used as component parts in the manufacture of final products), used for any purpose in the factory.
Parts of paint plant are not covered by this exclusion clause. Therefore, parts of paint plant are eligible for credit as inputs under Rule 57A as has been held by the Larger Bench of the Tribunal in case of Union Carbide India Ltd. v. Collector of Central Excise, Calcutta-I and this decision was subsequently upheld by the High Court in case of Collector of Central Excise, Patna v. Tata Engineering & locomotive Co. Ltd. and in case of Escorts Ltd. v. Collector of Central Excise, Bangalore . He stated that even though they have taken the credit on the parts, components and spares of paint plant under Rule 57Q, however, this may be taken as inputs under Rule 57A and credit may be allowed to them under Rule 57A in view of the decision of the Larger Bench of the Tribunal in case of Commissioner of Customs & C. Excise, Meerut-I v. Modi Rubber Ltd. wherein it was held that declaration filed by the assessee in terms of Rule 57Q was sufficient for the purpose of extending credit on inputs within the meaning of Rule 57A.
4. Regarding time bar in the case of Appeal No. E/975/2002, the learned Counsel pleaded that show cause notice was issued to them under Rule 57U of the Central Excise Rules, 1944. According to Rule 57U(1), where credit of the specified duty paid on capital goods under Rule 57Q has been taken on account of an error, omission or mis-construction, on the part of an officer or a manufacturer, or an assessee, the proper officer may, within six months from the date of filing the return required to be submitted in terms of Sub-rule (10)of Rule 57T, and where no such return as aforesaid is filed, within six months from the last date on which such return is to be filed under the said rules, serve notice on the manufacturer or the assessee who has taken such credit requiring him to show cause why he should not be disallowed to such credit and where the credit has already been utilised, why the amount equivalent to such credit should not be recovered from him. He stated that in this case credit was taken by them between February 97 and January 98. However, show cause notice was issued to them on 11.1.1999. This show cause notice is far beyond the period of limitation of six months from the date when such returns were required to be submitted. He pleaded that it they have not submitted the return, then show cause notice' was to be issued within six months from the last date of return required to be filed under the rules.
5. Shri L. Narasimha Murthy, learned SDR appearing for the Revenue pleaded that the appellants are not eligible to any credit on paint plant and its parts under Rule 57Q of the Central Excise Rules. The goods falling under chapter heading 84.24 are excluded from the list of the capital goods used in the factory of manufacturer which are eligible for Modvat credit. He stated that the parts of the paint plant are also excluded when the main plant was excluded. He stated that Rule 57A, 57B and 57Q alongwith the entire scheme of Modvat credit should be read harmoniously to make it clear that credit under Rule 57Ais allowable only on those inputs which are used in or in relation to the manufacture of final products. Parts and components of paint plant cannot be considered as inputs. He relied on the following decisions of--
(i) High Court of Gujrat in case of Torrent Laboratories Pvt. Ltd. v. UOI wherein it was held that whenever the Legislature makes a special provision which would be applicable to specific cases, the provision relating to specific cases would be applicable to specific cases and not the provision relating to general cases.
(ii) High Court of Gujrat in the case of Darshan Hosiery Works v. Union of India 1980 ELT 390 (Guj.) wherein it was held that if a special provision is applicable, then a general provision cannot apply to the same subject because special provision carves out an exception.
(iii) Tribunal in case of Hematic Motors P. Ltd. v. Commissioner of Central Excise, Pune wherein it was held that Modvat credit scheme is consisting of a number of Rules. All the rules are to be read together for purpose of extending the benefit under the scheme.
(iv) Larger Bench of the Tribunal in case of CCE, Indore v. Surya Roshni Ltd. .
He pleaded that under Rules 57B(2) manufacturer of final products are not allowed to take credit of duty on machines, machinery, equipment, apparatus, tools, appliances or capital goods as defined in Ruled 57Q (other than those used as component parts in the manufacture of final products), used for any purpose in the factory. He stated that the parts and spares for paint plant are parts of capital goods falling under sub-heading 84.24, therefore these cannot be considered as eligible for Modvat credit when heading 84.24 is excluded from, the capital goods. He stated that these cannot be taken as inputs as they are not used in the manufacture of the final products. He pleaded that only those inputs which are notified under Rule 57A are eligible for Modvat credit as inputs and the decision of the Tribunal in the case of Union Carbide India Ltd. (supra) and other decisions relied upon by the appellants are not applicable on the facts and circumstances of the present case.
6. We have carefully considered the submissions made by both the sides. We find that the appellants are manufacturers of metal enclosures for electrical and electronic items, industrial cooling equipment and their parts. The appellants have claimed that in view of the decision of the Larger Bench of the Tribunal in the case of Union Carbide India Ltd. v. Collector of Central Excise, Calcutta-I , they are eligible for Modvat credit on parts and spares of paint plant. This stand was also taken before the Commissioner (Appeals) and he on page 10 of his order has observed that--
the final product manufactured by the appellants are industrial cabinet and industrial cooling units and their components. It is difficult to find both on facts and law as to how the parts of paint plant could be used as input into the manufacture of industrial cabinet and industrial cooling units and their components. Thus, the appellants are not eligible for Modvat credit on these parts and components either under Rule 57A or under 57Q. The lower authority has therefore, rightly disallowed this amount of modvat credit to the appellants....
We find that the Commissioner (Appeals) has not examined the matter properly, although the appellants had contended that the definition of inputs and capital goods as existed at the relevant time would not preclude the applicability of the decision of the Larger Bench of the Tribunal in the case of Union Carbide India Ltd. (supra). We find that Chapter V of the Central Excise Rules, 1944, at the relevant time was divided into separate sections such as--
(i) Section A--General--It covered Rule 43 to Rule 57
(ii) Section AA--credit of duty paid on excisable goods used as inputs and it covered Rule 57A to Rule 57
(iii) Section AAA--credit of money in respect of certain raw material used in the manufacture of certain excisable goods. It covered Rule 57K to Rule 57P
(iv) Section AAAA--credit on duty paid on capital goods used by the manufacturer of specific goods. This covered Rule 57Q to Rule 57U.
Rule 57Q specified description of capital goods falling within the schedule of the Central Excise Tariff Act, 1985, for which credit was allowable if these are used for manufacture of final products mentioned in the said Rule. Heading 84.24 of the schedule of the Central Excise Tariff Act was excluded from the capital goods eligible for modvat credit. Therefore, the parts and accessories of paint plant falling under heading 84.24 were also not eligible for Modvat credit under Rule 57Q.
7. The appellants have claimed that parts of paint plant are eligible for Modvat credit under Rule 57A of the Central Excise Rules, 1944, as inputs, as these are used in the manufacture of final products and these parts of paint plant and the final products manufactured by them are notified under Rule 57A. They, therefore, pleaded that the decision of the Larger Bench of the Tribunal in the case of Union Carbide India Ltd. (supra) is fully applicable in their case. We find that under Rule 57B(2), a manufacturer of the final products is not eligible to take credit of duty paid on--
(i) machines, machinery, equipment, apparatus, tools, appliances or capital goods as defined in Rule 57Q (other than those used as component parts in the manufacture of final products), used for any purpose in the factory.
We find that similar provision was there in 'explanation' to Rule 57A which was interpreted by the Tribunal in case of Union Carbide India Ltd. (supra). That explanation excluded machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods for bringing about any change in any substance in or in relation to manufacture of final products. This explanation was interpreted by the Larger Bench of the Tribunal in the case of Union Carbide India Ltd. (supra) and it was decided that the parts and spares of machines and machinery, plant and equipment, apparatus, tool or appliances used for producing or processing of goods for bringing about any change in any substance in or in relation to manufacture of final products are eligible for modvat credit as these are not excluded by the 'Explanation'. We find that Rule 57A(4) allows credit of specified duty on inputs used in manufacture of final products as well as on inputs used in or in relation to manufacture of final products whether directly or indirectly whether contained in the final products or not. The reading of Rule 57A(4) and Rule 57B(2) together, we find that the machines, machinery, equipment, apparatus, tools, appliances or capital goods as defined in Rule 57Q (other than those used as component parts in the manufacture of final products) are not eligible for Modvat credit under Section AA of Chapter V of Central Excise Rules as these are covered by Section AAAA of Chapter V of the Rules, but component parts of these are not excluded from Section AA of Chapter V, if these are covered by Section 57A and are used in the manufacture of final products or in relation to manufacture of final products whether directly or indirectly and whether contained in the final products or not. Therefore, the ratio of the decision of the Larger Bench of the Tribunal in the case of Union Carbide India Ltd. is fully applicable on the facts and circumstances of the present case. Since the Commissioner (Appeals) has not examined whether the component parts of paint plant are used in or in relation to manufacture of final products directly or indirectly, it is not possible for us to know which component parts will be eligible for Modvat credit. The Commissioner (Appeals) has also not examined whether the declaration filed by the appellants under Rule 57Q of the Central Excise Rules for the components of paint plant can be taken as declaration under Rule 57A in view of the Tribunal's decision in the case of CCE, Meerut-I v. Modi Rubber Ltd. .
8. We therefore set aside the order of the Commissioner (Appeals) and remand the case back to him to examine the eligibility of component parts of paint plant for Modvat credit on the basis of the Tribunal's decision in the case of Union Carbide India Ltd. (supra) and in the case of CCE v. Modi Rubber Ltd. (supra) and pass fresh order. The other issues are kept open.