Customs, Excise and Gold Tribunal - Delhi
Commissioner Of C. Ex. vs Winsome Spinners Ltd. on 8 October, 1999
Equivalent citations: 2000(115)ELT756(TRI-DEL)
ORDER P.G. Chacko, Member (J)
1. The respondents are engaged in the manufacture of yarns falling under Chapters 52 and 55 of the Schedule to the Central Excise Tariff Act and are availing Modvat credit facility in respect of capital goods under Rule 57-Q of the Central Excise Rules, 1944. The Department alleged that the party had wrongly availed Modvat credit amounting to Rs. 1,39,802/- on certain goods i.e. automatic data processor, metal flexible and elbow fitting etc. treating the same as capital goods under Rule 57-Q ibid in the months of December, 1995 and accordingly issued show cause notice to them proposing to recover the aforesaid amount and also to impose penalty. In adjudication of the show cause notice, the Assistant Commissioner of Central Excise disallowed the above Modvat credit and confirmed the demand of the aforesaid amount and also imposed penalty of Rs. 20,000/- on the respondents. In the appeal filed by the party against the order of the Assistant Commissioner, lower appellate authority reversed the adjudicating authority's finding and allowed the above Modvat credit and also set aside the penalty. The Revenue has filed the present appeal against this order of the lower appellate authority, pleading, inter alia, that the aforesaid goods did not contribute "anything to bring about any change in any substance or material characteristic of raw material in its transformation to final product". "Moreover, this item is a part of automatic data processing machine and not plant and machinery used for production of final product" (vide Ground (i) of the Grounds of Appeal). The Revenue has further relied on the decision of the Hon'ble Supreme Court in the case of Annapurna Carbon Ind. Co. v. State of Andhra Pradesh 1976 (37) STC 378 (S.C.) and has contended that the aforesaid items cannot be termed as part or accessory of any capital goods.
2. I have heard the learned JDR, Shri S. Ramanathan for the appellant/Revenue and the learned Advocate, Shri Balbir Singh for the Respondents. I have also carefully considered the orders of both the lower authorities and connected records of the case.
3. It is apparent on the face of the impugned order that the function's of the goods under consideration were duly considered and appreciated by the lower appellate authority and that, on the basis of such appreciation, the lower appellate authority has held the said items to be covered by the expression of 'capital goods' under Rule 57Q ibid. I also come across a written submission of the respondent amongst the records of the case, wherein the function of the goods in question have been explained as follows :-
"DATA PROCESSOR :- This is an Electronic device installed in the ring frame machine for monitoring spindles of ring frame and is installed to know stoppage, defective spindles breakage of yarn, so that working of ring frame machine can be verified, without stopping the ring frame. Complete data is available on the monitor of the said processor and necessary action is taken through this device to control the working of the ring frame machine. The aforementioned machine falls under Tariff Heading 8448.10 of the Central Excise Tariff Act and presently falls within specified tariff headings as provided under Rule 57Q. Certificate in this regard enclosed herewith. Also the "Northern India Textile Research Association" has clarified that the said device plays role in the working of ring frame machine. Copy of its letter dated 6-3-1999 is enclosed.
METAL FLEXIBLE AND ELBOW :- These fittings are used for compressed air pipe line from which components are taken to different machine with the help of ELBOW, hose spare pipe, adopter fitting. The said item falls under the categories of pipes and fitting thereof as provided under Rule 57Q."
In the above submission, there is reference to letter dated 6-3-1999 of the Northern India Textile Research Association, a copy of which is also found amongst the records of the case. The text of the said letter viz. Northern India Textile Research Association, linked to the Ministry of Textiles, Government of India, has also set out the function of the automatic data processor in the ring frame of spinning mill vide the second para of the said letter extracted below :-
"Automatic Speed Control System is being used on Ring frame mainly to control the speed of the machine with the help of the Automatic Data Processing System. It is possible to change the speed of the machine without stopping it. The use of Automatic Data Processing System will reduce the down time of the machine and hence will increase the production and quality. Frequent start and stop of the machine may cause for bad quality, high waste percentage and loss in production. The Ring frame is a capital intensive machine, cost of down time will be higher and higher. Therefore realising the cost of down time it has become essential to have automatic control system on a Ring frame to achieve better utilisation of the machine."
4. The learned JDR has not disputed the authenticity of the opinion expressed by the Director of Northern India Textile Research Association in the aforesaid letter. Therefore, I find that the grounds of the present appeal are not tenable and, in the light of the function of automatic data processor as explained hereinbefore, I hold that the said item is a process control instrument or equipment used in the spinning mill of the respondents and hence would come within the scope of 'capital goods' under Explanation to Rule 57-Q ibid. As regards the metal flexible and elbow, which are used for compressed air pipe line, from which components are taken to different machined used in the mill, the said items are also covered by Explanation 1(b) of Rule 57-Q ibid and hence eligible for Modvat credit under the said Rule.
5. The learned Advocate for the respondents has also relied on the decision of the Tribunal's Larger Bench in the case of Jawahar Mills v. C.C.E., Coimbatore 1999 (108) E.L.T. 47 (T), in support of his argument that all the aforesaid goods would squarely fall within the four corners of 'capital goods' under Explanation to Rule 57-Q ibid in the light of interpretation of this Rule by the Tribunal's Larger Bench. I would agree with this submission of the learned Advocate.
6. In view of the aforesaid findings, I hold that the decision of the lower appellate authority regarding Modvatability of automatic data processor and metal flexible and elbow, in respect of which a credit of duty amounting to Rs. 1,39,802/- was taken by the party for the month of December, 1995, cannot be faulted and is only liable to be upheld. Accordingly, I dismiss the Revenue's appeal.