Customs, Excise and Gold Tribunal - Delhi
Jindal Polymers vs Commissioner Of C. Ex. on 10 March, 1998
Equivalent citations: 1998(62)ECC254, 1998ECR649(TRI.-DELHI), 1998(103)ELT569(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The above appeal arises out of the order of the Additional Commissioner of Central Excise denying Modvat credit of Rs. 3,52,755/- on certain items which can be broadly categorised as (a) measuring instruments (b) inverter and spares and differential pressure transmitters (c) programmable logic controller (d) regulating devices for maintaining proper atmosphere in the manufacturing process such as pressure gauge, vacuum gauge (e) boiler furnace sheet, fan coil unit and system cable, on the ground that they do not fall within the definition of capital goods for the purpose of Rule 57Q. In addition, a penalty of Rs. 50,000/- has also been imposed. The period during which the above quantum of credit was availed is August, 1994 to January 1995.
2. The facts of the case are that the appellants are engaged in the manufacture of polyester polymer chips falling under sub-heading 3907.60 of the Schedule to the CET A, 1985. They were availing Modvat credit on the above mentioned items. Proceedings were initiated against the appellants vide show cause notice dated 9-2-1995 proposing disallowal of Modvat credit on the grounds inter-alia that the items are in the nature of instruments/safety devices. The adjudication order was passed on 19-10-1995 disallowing Modvat credit of the above mentioned amount and imposing the penalty as mentioned above. Hence this appeal.
3. I have heard Shri S. Vyas, learned Advocate and Shri Sanjiv Srivastava, learned DR.
4. The undisputed use/function of the items in dispute is as under :
ANNEXURE-4 JINDAL POLYMERS - GULAOTHI Showing the use/function of the Capital Goods referred to in the show cause notice dated 9-2-1995 and order-in-original No. 32/Addl., dated 19-10-1995 passed by the Addl. Commissioner, Central Excise, Ghaziabad.
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Sl. Description of Use/Function of the Capital Goods No. Goods
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(1) (2) (3)
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1. Process In very first stage of the manufacturing process of Control Polyester Polymer Chips (Final Product) the raw material Instrument namely Dimethyl Terephthlate (DMT) which is in solid form is converted into liquid/melt form by transferring this solid DMT into a tank known as DMT melter. This tank is duly jacketed. In this jacket of the tank steam is circulated to the required pressure level to achieve the required temp. (say 150-200 Degree Calcius of DMT inside the tank) this process control Instrument is installed/used to control the steam pressure. This is an accessory of DMT melter equipment.
2. Boiler Boiler furnace sheet is used in steam Boiler combustion furnace zone where fuel oil is burnt to produce steam. The steam sheet so produced is used for primary heating in raw material -
DMT line and five stage ejector to create vacuum without final product viz Polyester Polymer Chips cannot be produced. It is necessary for heating raw materials.
Without furnace sheet steam cannot be produced and without steam Polyester Chips cannot be produced.
3. Steam These have provided in the steam line. Its function is to
8. Traplock separate out the steam and the condensate, before steam Indicator trap, where the consumption of steam is high e.g. before 50 mm size the steam ejectors, DMT melter and Ethylne Glycol separator recovery distillation units. It also helps in the economy of fuel consumption therefore increases the efficiency of the plant. As these Instruments maintain fine vaccum the production of final product i.e. Polyester Chips comes to better quality.
4. Rockwin After getting the raw material - DMT from solid form Turbine duly converted into molten form at a specific temperature Flowmeter (150-200 Degree Calcius) we have to transfer this molten DMT in a specific quantity to the next equipment/tank called as Poly Reactor. In this Reactor reaction between the raw materials namely Dimethyle Terephthlate (DMT) and Mono Ethylene Glycol (MEG) takes place. There must be proportionately specific quantities of these raw materials in the Reactor. Rockwin Turbine Flowmeter is installed and used on the transferring line so as to regulate/control the supply of molten DMT to the reactor in precised specific quantity.
5. H.R.C. Fuse, To transfer the DMT duly melted centrifugal pumps used Spare kit to pump it into the Poly Reactor across filter. This H.R.C. Contractor fuse, spare kit contractor is an accessory for starting the above centrifugal pumps to feed the Electrical supply to motor of the pump.
6. Pressure In the manufacturing process of Polyester Polymer Chips Gauge all the melt lines are jacketed with a special Oil known as
7. Mercury in santotherm Oil. With the help of these jacketting we Steel Dial maintain consistency of temperature by flowing the Thermometer above santotherm Oil in vapour form thereby this related
12. Bi-Metal temperature of process melt and pressure of vapours of Dial santotherm Oil is constantly monitored at different Thermometer locations of the process line in the plant. This activity -
process is done by using the above capital goods namely pressure gauge, mercury in steel dial thermometer and Bi-metal dial thermometer.
9. System The total process of the whole plant for the manufacture Cable of Polyester Polymer Chips is controlled/operated through an Electronic Instrument like Remote Control which is known as Data Control System (DCS). By this DCS activity is operated of the plant such as supply of raw material namely DMT & MEG, stoppage of its supply, steam pressure, Air pressure etc. etc. Signals are sent through wires known as system cable, connected between panel to this Data Control System.
10. Programm- After getting reaction of DMT with MEG the Polymer able Logic reaches to the strand form. These Polymer strands then Controller cut by cutter into Chips form and known as Polyester Polymer Chips which are accumulated in a small tank.
With the help of programmable logic controller Polyester Polymer Chips are transferred to the storage Silo form where these Polyester Chips are packed in Bags to become in marketable stage. These operations sequences are pre-programmed in this programmable logic controller.
11. Alphaline It is an Electronic device which convertes pressure (such Differential as air pressure, vacuum etc. etc.) signals into Electronic Pressure signals and transmit to the Data Control System (DCS). It Transmeter is an accessory of DCS. Polymer melt is kept in flow condition by jacketed heating vessel and pipe line using high temp. This device is also use to control and keep the accuracy of temperature at set point in this Instrument through DCS.
13. Fan Coil unit Data Control System as discussed above is to be kept in a room having specific temperature so that this Electronic Instrument works properly and without intruption. Fan coil unit is a compact unit and helps in maintaining the temperature of the said room.
14. Instrument for It is a resistance temperature detector type temperature Measuring sensing element. Its resistance varies according to process Temperature temperature variation. This temperature signal (RTD) transmitted to control system known as DCS to maintain the polymer temperature. Quality of polyester Chips depends on the temperature of polymer.
15. Invertor and Invertor is a controlling device to control the speed of Spares variable speed motors of the equipment namely agitator.
Agitator is used to mix the Polymer in Poly reactor.
Invertor is controlling the agitator speed according to the requirement of the manufacturing process. Quality and viscosity of Polyester Chips depends on mixing and proper heating of Polymer during Polymerization.
16. Watering It is a pump which creates vacuum (negative pressure Vaccum with respect to atmosphere) in the system which is pump with necessary for the distillation process of Ethylene Glycol Pressure recovery. The show distilled recovered Ethylene Glycol and vacuum being raw material is reused in the manufacturing gauge process of Polyester Chips.
17. Pressure Constant air pressure is required to operate pneumatic Reducing type Instruments. Pressure reducing valves are used to Valve maintain and control the constant air pressure. It is an accessory of the plant.
18. Safety Relief It is a safety device which is used at the stage of Valve esterification and Poly reactor. Whenever reactor pressure exceeds the required pressure setting, this safety relief valve operate and release excess pressure of the reactors to avoid any abnormality in Polymerization being manufacturing process. It is an accessory of the plant.
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5. Let us now deal with the various categories of the above items:
(a) Measuring instruments: The items listed at Sl. Nos. 1, 3, 4, 6, 7, 12 and 14 are in the nature of measuring instruments. The contention of the goods is supported by the decisions of the Tribunal in the case of Geep Industrial Syndicate v. CCE reported in 1996 (88) E.L.T. 753, A VI Photochem Ltd. v. CCE reported in 1997 (20) RLT 331. Therefore, I hold that the items above except at Sl. No. 7 (Mercury in Steel Dial Thermometer) are capital goods entitled to credit. Mercury in steel dial thermometer has already been held not to be capital goods in the case of the appellants' sister concern in Final Order Nos. A/5-6/98-NB, dated 30-12-1997 and following that ratio, I hold that this item is not eligible for Modvat credit.
(b) Invertor and Spares and Alphaline Differential Pressure Transmitter : These are controlling devices for controlling the speed of the agitators which is used to mix polymer in poly reactor. The quality and viscosity of the polymer chips depend on mixing and proper heating of polymers during polymerisation. Hence it is held that these are instruments and apparatus covered as capital goods under Rule 57Q and Modvat credit is admissible thereon. I also note that credit has been extended to alphaline differential pressure transmitters in the case of the appellants' sister concern under Final Order No. A/5-6/98-NB dated 30-12-1997.
(c) Programmable Logic Controller : This helps to transfer polyester polymer chips to storage Silo from where polymer chips are packed to make them marketable. The polymers are cut into smaller chips and the entire sequence is controlled by the programmable logic controller. It is, therefore, an essential device used in producing or processing of polymer chips. Following the ratio of the Tribunal's order in the case of Eveready Industries India Ltd. reported in 1997 (93) E.L.T. 580 (Tribunal), I hold that Modvat credit is admissible on this item.
(d) Regulating Devices such as Pressure Reducing valve, safety relief valve, pressure gauge and vacuum gauge : These are essential for maintaining proper atmosphere in the manufacturing process of the final products and are hence to be considered as capital goods entitled to credit, following the ratio of the Tribunal's decision in the case of CCE v. Navbharat Paper Mills reported in 1996 (86) E.L.T. 501 and in the case of Maihar Cements v. Collector reported in 1997 (23) RLT 306.
(e) System Cable, Boiler furnace sheet and Fan coil unit are essential for the manufacture of polymer chips. Signals are sent to the data control system through wires known as system cables connected between panel and data control system. Boiler furnace sheet is used in steam boiler combustion zone where fuel oil is burnt to produce steam which is used for primary heating of raw materials. The reliance by the DR on the Tribunal's order in the case of Malvika Steel Ltd. v. CCE, Allahabad reported in 1998 (97) E.L.T. 530 to support his contention that boiler furnace sheet is not an item of capital goods, is misplaced in view of the fact that in the Malvika Steels case, cement and steel structure used in erection and fabrication of blast furnace is building material and not capital goods, which is vastly different from the present case wherein the boiler furnace sheet is a part of the boiler, and is not building material. Fan coil unit is used to maintain temperature in the control room for production of high quality polymer chips. Since these items are integrally connected with the production activity, following the ratio of the Tribunal's order in the case of CCE v. Modi Xerox Ltd. reported in 1996 (88) E.L.T. 530, in which the decision in the case of CCE v. Shanmugaraja Spinning Mills P. Ltd. reported in 1997 (89) E.L.T. 84, relied upon by the DR to contend that the item used for maintaining temperature and humidity are not capital goods, has been distinguished, I hold that they are eligible for Modvat credit as capital goods.
6. In the result, I hold that Modvat credit is available to all the items in dispute except mercury in steel dial thermometer.
7. The appeal is disposed of in the above terms.