Customs, Excise and Gold Tribunal - Tamil Nadu
Titan Industries Ltd. vs Commissioner Of C. Ex. on 6 August, 1996
Equivalent citations: 1997ECR165(TRI.-CHENNAI), 1997(91)ELT60(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. The issue in the appeal relates to the admissibility of Modvat credit in respect of Coated Abrasives used in the appellants' factory in the polishing section for polishing of the watch components. The items in question are enumerated below :
"Coated Abrasive :
(a) Flan Brush/Abrasive Brush :
It is used in polishing shop for high grade of deburring/polishing operation on watch cases.
(b) W.P. Paper Disc :
These are consumables used for fine polishing on steel surfaces to give mirror finish.
(c) R.R. Clutch Belt/A.C. Belt :
These are abrasive coated consumables in a form of clutch belt used in polishing shop to obtain special type finishes such as smoky/satin/matty etc. Without this process, the end-product cannot be manufactured and consumed.".
2. The learned Advocate for the appellants has pleaded that the issue now stands covered by the ratio of the decision of the Larger Bench in the case of Union Carbides India Ltd. v. Collector of Central Excise reported in 1996 (15) RLT 144 (CEGAT-WB). The learned Advocate has drawn our attention to Para 18.1 of the judgment which is reproduced below for convenience of reference :
"18. (i) Felt Phosphor Bronze stainless steel wire mesh, lin cloth, Dandy cloth etc. - Pulp with excess water comes from the pulp making machine to the paper making machine. Pulp is allowed to fall on phosphor bronze or stainless steel wire mesh. Pulp particles remain on the wire mesh and web of pulp fibre is formed. It moves on moving wire mesh (endless) and is allowed to fall on felt (cotton, woollen or synthetic). The moving felt carries the pulp web to the drier and is calendered or pressed being wound on rolls and treated further. Wet paper is passed between Dandy Rolles covered with Dandy cover so as to smoothen the surface of the paper. These articles are damaged in the process and require replacement periodically. They are replaceable goods used in the paper making machine in the course of manufacture of paper. They can be regarded in a way, as parts of the paper making machine or machinery used in the machine or for the purpose of the machine; but by their very purpose, they are goods used in relation to the manufacture of paper or paper products and hence are 'inputs' as contemplated in Rule 57 A. In the light of what we have indicated above, the decisions in Collector of Central Excise v. Ashim Paper Products (P) Ltd. - 1990 (50) E.L.T. 12 (Tribunal) FRB, Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise - 1990 (50) E.L.T. 252 (Tribunal) SRB, Sirpur Paper Mills Ltd. v. Collector of Central Excise -1991 (56) E.L.T. 649 (T) SRB are not correctly decided. On the other hand the decisions in Gujarat Alkalies & Chemicals Ltd. v. Collector of Central Excise - 1989 (41) E.L.T. 424 (Tribunal), WRB, Cominco Binani Zinc Ltd. v. Collector of Central Excise - 1990 (48) E.L.T. 283 (Tribunal) SRB, Travancore Cochin Chemicals Ltd. v. Collector of Central Excise - 1990 (50) E.L.T. 172 (Tribunal) SRB, Collector of Central Excise v. Standard Alkali - 1992 (59) E.L.T. 127 (Tribunal), Straw Products Ltd. v. Collector of Central Excise & Customs - 1992 (59) E.L.T. 572 (Tribunal) ERB, Collector of Central Excise v. Emami Paper Mills Ltd. - 1992 (61) E.L.T. 489 (Tribunal) ERB, and Collector of Central Excise v. Bihar Caustic and Chemicals Ltd. - 1994 (72) E.L.T. 739 (Tribunal) ERB are correctly decided."
He has also stated that the Tribunal has considered at length the scope of the exclusion clause under Rule 57A and have taken note of the scope of the terms apparatus, appliances, machines, machinery, plant and tool which have been specifically excluded from the purview of Modvat Scheme. He has in this connection also referred to Paras 24 and 25 which are reproduced below for convenience of reference :
"24. The one common thread which runs through all these definitions is the self-contained or complete nature of the goods. Almost every one of the expressions take in self-contained, complete units or group or assemblage of parts. None of the expressions take in mere part unless it be that the part by itself is a self-contained or complete machine, apparatus, appliance, machinery, or tool. There is no controversy that machine used for manufacture of specified final products would be eligible input for the purpose of Rule 57A of the Rules, but for the exclusion clause (i). That being so, the absence of specific reference to spare parts in the exclusion clause (i) is of considerable significance. The Rule-making authority, which was aware that specified machines and such other goods are eligible inputs if they are used in the manufacture of specified final products, and specifically excluded machines and such other goods from the ambit of the Rule, must have been aware that spares of such machinery, machines or other goods would also be eligible inputs but did not specifically incorporate spares in the exclusion clause (i). There is a faint argument that if spare parts are regarded as not excluded by virtue of exclusion clause (i) and Modvat benefit is extended to such spare parts, the provision is likely to be misused and all the parts of a machine may be purchased and brought to the factory and the parts assembled to become a full machine to be used in the manufacture of final product and that could adversely affect the Revenue. This apprehension is not justified. Spares or parts concerned in these appeals are to replace worn-out parts or parts which require replacement. In the example cited, credit will be taken of the duty paid on the parts of the machine and used to pay duty on the machine manufactured out of the parts but machine as input is excluded by clause (i). If, however, the parts are brought in C.K.D. condition, credit of duty paid on the C.K.D. packages is not used to pay duty on the machine since there is no "manufacture" of any machine and credit cannot be used for paying duty on the final product since C.K.D. package is itself treated as machine and machine as input is excluded under exclusion clause (i).
25. The purpose of Rule 57 A is to grant benefit of Modvat credit to manufacturers using specified goods in and in relation to the manufacture of specified final products. What could be the particular object intended to be achieved by introducing the exceptions in the exclusion clause (i)? The clause excepts not one but a group of items. If the items were totally dissimilar with no common factor or thread, the items can be given their widest meaning. But almost all the items can be brought under an intelligible classification. The Government must have thought that only "self-contained, complete or whole" machines and not parts thereof are to be excluded. There is no reason why this logically limiting restriction should not be placed on the exclusion clause (i). The manifest intention becomes amply clear on account of the absence of words "or parts thereof at the end of the exclusion clause."
3. The learned JDR for the Department has pleaded that in this connection Para 29 will also be relevant and has pleaded proper inference can be drawn by reading Para 29 that the goods in question cannot be eligible for the benefit of Modvat credit. This Para 29 is also reproduced below for convenience of reference :
"29. We have indicated the manner in which and the purpose for which Felts, Phosphor Bronze, Stainless steel, wire cloth, wire mesh and Dandy cloth are used in the machines in the manufacture of paper or paper products. They are definitely parts of machines not comprehended by the exclusion clause (i) of the explanation to Rule 57A of the Rules. Therefore, spares of such goods cannot be regarded as falling within this clause. We have also indicated the manner in which and the purpose for which copper wire is used in the manufacture of metal containers. Copper wire so used cannot be regarded as part of the machine. However, it is contended on behalf of the Revenue that it is an "appliance" within the meaning of the expression used in the exclusion clause. "Appliance" as generally understood is any tool or machine that is used to carry out a specific task or produce a desired result or an equipment that draws electric or other energy and produces a desired result. Copper wire used in the manufacture of metal containers is not a "tool" or "machine" that is used to carry out a specific function; nor is it an 'equipment' that draws any energy in producing a desired result. Hence it cannot be regarded as an "appliance". It does not fall within the ambit of any of the other expressions used in the exclusion clause."
4. The learned Advocate has pleaded that the use of the items in question has been set out in the learned lower authority's order in Para 8(2). The learned lower authority's order which is also, reproduced below for convenience of reference:
"(2) Coated Abrasives :
(a) Flap Brach Abrasive Brush (b) W.P. Paper Disc (c) RR Clutch Belt/A.C. Belt.
These items are used in the polishing shop of the assessed for polishing the watch cases. These operations are done by a machine and the brush, paper disc and clutch belt, etc. are fixed to the machine. When these brushes perform they are being attached to a machine which cannot be considered as a consumable. Hence, I find hold that these items are in the nature of parts of machinery and are not eligible as an input. Credit of duty availed on these items are irregular and merits reversal under Rule 57(I) of Central Excise Rules, 1944."
He has pleaded as would be seen these items are consumables in nature by reason of function and wear out a revision is required to be made from time to time. His plea is that the use of the item is similar to the use of Wire cloth and synthetic mesh felts in the paper mill. He has therefore pleaded that the ratio of the decision in that case would squarely apply to the facts in the present case.
5. Heard the learned JDR for the Department. He has nothing specifically to put forth by way of a rejoinder.
6. We have considered the pleas made by both the sides. We observe that the Larger Bench of the Tribunal has taken into consideration that the items like felts, phosphor, bronze, stainless steel, wire cloth etc. have been used. The use of the same has to be considered as use in or in relation to the manufacture of the notified finished product under Rule 57A. In the present case the items in question are similarly used in the sense that these are used for polishing of the components i.e. in the formation of the parts in question and these are not component parts of paper machinery in the same sense as wire cloth and dandy cloth etc. We therefore hold that the ratio of the judgment cited by the learned Advocate would clearly apply to the facts and circumstances and the plea of the appellant therefore in regard to the Modvat credit has to be allowed. Ordered accordingly.