Customs, Excise and Gold Tribunal - Delhi
Birla Corporation Ltd. vs Commissioner Of Central Excise on 25 March, 2003
Equivalent citations: 2002ECR584(TRI.-DELHI), 2003(160)ELT268(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In this appeal, filed by M/s. Birla Corporation Ltd., the issue relates to the availability of Modvat credit in respect of certain specified items. Shri P.C. Jain, learned Advocate, submitted that the Appellants manufacture clinker and cement; that lime stone, principal raw material, is quarried from their own captive mines which are located at 3 to 4 k.m. approximately from the factory; that the Commissioner under the impugned has disallowed the Modvat credit in respect of explosives under Rule 57A of the Central Excise Rules, 1944; that the explosives are used as an input for the excavation of lime stone; that the Supreme Court in the case of Jay Pee Rewa Cement v. CCE, 2001 (133) E.L.T. 3 (S.C.) has allowed the Modvat credit of the duty paid on explosives holding that "reading of Rule 57A clearly shows that the Notification is to specify the goods used in or in relation to the manufacture of the final product whether directly or indirectly and Rule 57A does not in any way specify that the inputs have to be utilized within the factory premises; that Explanation contained in Rule 57A also does not in any way restrict the use of the inputs within the factory premises nor does Rule 57A requires the inputs to be brought into the factory at any point of time."
2. The learned Advocate, further, submitted that the Commissioner has disallowed the Modvat credit of the duty paid on spares of ropeway on the ground that ropeway is used for transporting lime stone from mines to the factory. He contended that ropeway conveyor is a system comprising of Motor, Main drive, Auxiliary drive, Chain haulage, Incoming Retarder Chain, Rotary distributor loading material in buckets, tyres, stranded wires and other supporting structures; that the entire Ropeway system is installed within the factory; that all components and parts are received within the factory on Modvatable invoices and the work of installation is taken up within the factory; that the Ropeway buckets are made to travel from inside the factory to the Primary Crusher on Base frames that are installed outside the factory; that once the system is operating, the empty buckets travel on the supporting structure to the Crusher; that the chain and buckets do not stop at the Crusher; that they are directly loaded with crushed limestone from the Primary Crusher while still moving; that on the return journey, they come back loaded and enter the factory in a loaded condition and unload the lime stone in the yard automatically without stoppage. He, further, submitted that the activity of manufacture of clinker commences right from the stage of mining, and continues with the crushing of limestone boulders into gittis in the Crusher Plant; that accordingly, they had shown the crusher plant as also the Ropeway used for conveying the crushed limestone in its ground plan, that had been approved from time to time. He relied upon the decision in the case of J.K. Udaipur Udyog Ltd. v. CCE, Jaipur, 2002 (147) E.L.T. 996 (T) = 2002 (105) ECR 374 (T) wherein the Tribunal has allowed the Modvat credit on the Ropeways holding that extension outside the factory is a part of Ropeway inside the factory, and therefore, it should be treated as capital goods.
3. In respect of disallowing Modvat credit on tyres used in dumpers, truck and material handling equipment, the learned Advocate submitted that the material handling equipments are eligible capital goods. He relied upon the decision in the case of Ashok Leyland Ltd. v. CCE, 2001 (135) E.L.T. 161 (T) = 2001 (42) RLT 342 (CEGAT) and CCE v. A.C.C. Ltd., 2000 (119) E.L.T. 82. He mentioned that the tyres would be eligible capital goods as components and spares in terms of Explanation 1(b) of Rule 57Q. He, further, mentioned that similarly Modvat credit will be available in respect of spares of dumpers. Reliance has been placed on the decision in the case of CCE v. Uttam Industrial Engg. Pvt. Ltd., 1996 (86) E.L.T. 498, and Grasim Cement Ltd., 1997 (96) E.L.T. 354.
4. The learned Advocate mentioned that the Appellants had purchased diesel engine and X-ray Spectrometer from abroad with a warranty of replacement of defective parts within one year; that they had imported certain parts which were found defective and supplied free of charge by the foreign company, that the Commissioner has disallowed the Modvat credit on the ground that there could not be availment of credit twice on purchase of goods and Modvat credit could be taken by the appellants only if they have reversed the credit earlier taken on the defective parts that were being replaced. The learned advocate mentioned that the Commissioner's finding is outside the scope of ambit of Modvat Rules which do not lay down any such condition; that they had paid the countervailing duty at the time of import of the parts for replacement; that the defect had occurred during their use and there is no provision even in Rule 57S which requires that credit should be reversed if some parts develop defect during their use in the warranty period. He also mentioned that the Modvat credit has been denied to them as the same was taken on the basis of photocopy of invoices; that two invoices are now available and the credit in respect of the same may be allowed. Finally the learned Advocate mentioned that the Commissioner has mistakenly disallowed the credit of Rs. 20,728/- twice - once at Srl. No. 7 at page 19 and again at Srl. No. 48 at page 20 of the impugned order; that a similar mistake has been made in respect of Srl. No. 1 of the chart at page 19 of the order disallowing an amount of Rs. 81/681/- which has also been at page 17, Srl. No. 9 under the head 'Spare parts of dumper'.
5. Countering the arguments Shri V. Valte, learned SDR, submitted that Ropeway is used for carrying the raw materials from mines to the factory premises; that as such it is not a material handling equipment which is used in the factory of the Appellants; that the mere fact that Ropeway which brings the crushed lime stone from the mine unloads the bucket in the factory premises will not make it a capital goods used in the factory premises; that if the contention of the Appellants is accepted, every motor vehicle bringing raw material in the factory premises will be covered by the definition of the capital goods. He, therefore, submitted that no capital goods credit is admissible in respect of spares for the Ropeway. The learned SDR, further, submitted that dumpers are used for general purpose and as such the tyres and spares meant for dumpers, etc. are not eligible capital goods. Regarding free replacement items the learned SDR mentioned that as the parts have only been replaced, the credit cannot be given second time as the parts were taken away on account of their being defective. He also mentioned that the Modvat credit is not available on the basis of photocopy of the duty paying documents; that as per the provisions of law the Modvat credit is available on the basis of documents specified in Rule 57G of the Central Excise Rules, 1944.
6. We have considered the submissions of both the sides. As far as the Modvat credit of duty paid on explosives is concerned, the issue stands decided by the judgment of the Supreme Court in the case of Jaypee Rewa Cement v. CCE, M.P., 2001 (133) E.L.T. 3 (S.C.). Thus following the ratio of the said judgment of the Supreme Court we hold that Modvat credit of the duty paid on explosives is available to the appellants. It has been mentioned by the Revenue in the Cross objections that the Appellants' contention regarding credit disallowed twice was found on examination to be correct. Accordingly we hold that in respect of entries mentioned by the learned Advocate the credit is disallowable, if any, only once and not twice. As far as tyres and spares for dumpers are concerned the learned Advocate has submitted that these dumpers are used within the factory premises as material handling equipment. Nothing has been brought on record by the Revenue to show that these dumpers are not used within the factory premises. It has been held by the Tribunal in the case of Ashok Leyland Ltd. (supra) that Modvat credit in Rule 57Q is available in respect of tyres and tubes for Flow chart used for the movement of material within the factory. We, therefore, hold that Modvat credit of capital goods will be available in respect of tyres as well as spares used for dumper etc. which are used within the factory as material handling equipment. As far as availment of Modvat credit on free replacement items is concerned the contention of the Revenue is that the credit cannot be availed twice on single purchase of goods. On the other hand the Appellants claimed that while using the machine certain parts were found defective which were sent abroad for replacement as per terms of warranty and countervailing duty has been paid on the imported items which came as replacement. It is not the case of the Department that before the capital goods was put to use these parts were found defective and without putting to use were sent for replacement. In view of these facts we are of the view that Modvat credit will be available to the Appellants as the duty has been paid at the time of their import.
7. As far as availing of Modvat credit on the strength of duty paying documents is concerned we find substances in the submissions of the learned SDR that Modvat credit cannot be allowed on the basis of such photocopies. The learned Advocate for the Appellants, however, has mentioned that they have now in their possession two original invoices. The Appellants may produce the original copies of duty paying documents before the Adjudicating Authority for consideration. The Commissioner has disallowed the credit on the spares for Ropeway as the Ropeway is used for bringing crushed lime stone from the mines. It is not the case of the Appellant that the Ropeway is used as material handling equipment within the factory premises for carrying the material from one place to another within the factory. Ropeway admittedly is used to bring the lime stone from the mining area to the factory. It is, therefore, clear that it is used for bringing inputs from outside the factory premises into the factory premises. It cannot, therefore, qualify for the Modvat credit under Rule 57Q of the Central Excise Rules. The credit of duty paid on capital goods under Rule 57Q is available if the capital goods are used by the manufacturer in his factory for producing or processing of any goods or for bringing change in any substance for the manufacture of final product. The Supreme Court in the case of Jaypee Rewa Cement has held that "in view of the provisions of Rule 57Q the Appellants is not entitled to any relief". We find substance in the submissions of the learned SDR that the Ropeway is not used within the factory premises as it is only bringing the inputs from the source of supply into the factory. The mere fact that a part of the Conveyor Belt is also located in the factory premises and it is controlled from the factory will not make it an eligible capital goods for the purpose of Modvat credit. The decision relied upon by the learned Advocate are not relevant in view of the Supreme Court decision in the case of Jaypee Rewa Cement. Accordingly the Appellants are not eligible for the Modvat credit on the spares used in Ropeway.
8. As the issue involved in the present appeal is the interpretation of the term 'capital goods' we hold that no penalty is imposable on the Appellants. Accordingly we set aside the penalty of Rs. 1 lakh imposed on the appellants. The appeal is disposed of in above terms.