Customs, Excise and Gold Tribunal - Delhi
Malvika Steel Limited vs Collector Of Central Excise on 29 July, 1997
Equivalent citations: 1998(97)ELT530(TRI-DEL)
ORDER S.S. Kang, Member (J)
1. The appellants filed this appeal against the Order-in-Appeal dated 30-11-1995 passed by the Commissioner of Central Excise (Appeals), Allahabad. In this case, the Modvat credit on capital goods, that is on cement and steel structure was denied on the ground that it does not come under the definition of capital goods under Rule 57Q of Central Excise Rules, 1944.
2. The appellants are setting up a Blast furnace in its integrated steel plant for production of pig iron. The appellants took the benefit of Modvat credit on capital goods, in respect of cement and steel structure used in erection and fabrication of blast furnace under Rule 57Q of Central Excise Rules, 1944. Show cause notice was issued on the ground that cement and steel structure are not directly related in manufacture of final product and also are not included as capital goods as defined under Rule 57Q of the Central Excise Rules, 1944. After adjudication the adjudicating authority held that cement and steel structure are not plant, machinery or equipment as per definition under Rule 57Q of the Central Excise Rules, 1944. Appellants filed appeal and the same was dismissed.
3. Learned Counsel appearing on behalf of the appellants submits that, in the erection of the blast furnace, the appellants uses cement and steel structure as vital and essential specialised components and parts thereof and hence are capital goods under Rule 57Q of the Central Excise Rules, 1944. He submits that plant is understood, in commercial parlance as also not the machinery and the equipment for production of any goods, but also the complete land, building and factory in which any goods are produced or manufactured. He relied upon the technical and legal dictionaries in support of his argument that the definition of plant includes building, land, machine, apparatus, equipment and fixtures used for manufacture of goods. He submitted that as per McGraw Hill's Dictionary of Scientific and Technical Terms the plant includes the land, buildings and equipment used in an industry. He also relied upon Law Lexicon with Legal Maxims Vol. Ill which defines plant includes within its ambit buildings and equipment used for manufacturing purposes. He submits that the respondent has given a very restricted meaning to the term plant by restricting the same equipment/machinery. He relied upon the decision of the Honourable Supreme Court in the case of Indian Copper Corporation Limited v. Commissioner of Commercial Taxes, Bihar and Ors. reported in 1965 STC Vol. XVI Page 259. He submits that the Honourable Supreme Court in this case held that in a case where a dealer is engaged both in mining operations and in the manufacturing process - the two processes being interdependent - it would be impossible to exclude vehicles which are used for removing from the place where the mining operations are concluded to the factory where the manufacturing process starts. It appears that the process of mining ore and manufacture with the aid of ore copper goods is an integral process and there would be no ground for an exclusion from the vehicles those which are used for removing goods to the factory after mining operations are concluded. Nor is there any ground for excluding locomotives and motor vehicles used in carrying finished products from the factory. The expression intended to use in the manufacturing and process of sale may ordinarily include such vehicles as are intended to be used for removal of processed goods from the factory to the place of storage. He further submitted that this view was further followed by the Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Limited v. The Sales Tax Officer, Kanpur reported in AIR 1965 Supreme Court 1310. He submits that in this case the Honourable Supreme Court held that the process of designing may be distinct from the actual process of turning out finished goods. But there is no warrant for limiting the meaning of the expression "in the manufacture of goods" to the process of production of goods only. The expression "in the manufacture" takes in within its compass, all processes which are directly related to the actual production. Goods intended as equipment for use in the manufacture of goods for sale are expressly made admissible for specification. Drawing and photographic materials falling with the description of goods intended for use as equipment in the process of designing which is directly related to the actual production of goods and without which commercial production would be inexpedient must be regarded as goods intended for use "in the manufacture of goods". He also relied upon the decision of the Honourable Supreme Court in the case of Collector of Central Excise v. Eastend Paper Industries Limited 1989 (43) E.L.T. 201 (S.C.) where the Honourable Supreme Court held that component parts and raw material includes anything that enters into and form part of the manufacturing process or is required to make the article marketable must be deemed to be raw material or component part of the end product and must be deemed to have been used in completion or manufacture of the end product. In these circumstances, the learned Counsel submits that the cement and steel structure used in erection/fabrication of the blast furnace is covered under the provisions of Rule 57Q of the Central Excise Rules, 1944.
4. Shri Y.R. Kilania, JDR appearing on behalf of the respondent submits that cement and steel structure are not capital goods as defined under Rule 57Q of the Central Excise Rules, 1944. He, therefore, prays that the appeal be dismissed.
5. In this case, appellants took Modvat credit in respect of cement and steel structure used in erection of the steel furnace under Rule 57Q of the Central Excise Rules, 1944. Rule 57Q of the Central Excise Rules provides as under:
"Applicability : (1) The provisions of this section shall apply to finished excisable goods of the description specified in the Annexure below (hereinafter referred to as the "final products") for the purpose of allowing credit of specified duty paid on the capital goods used by the manufacturer in his factory and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, or as the case may be, on such capital goods, if such capital goods have been permitted to be cleared under Rule 57-5, subject to the provisions of this section and the conditions and restrictions as the Central Government may specify in this behalf:
Provided that credit of specified duty in respect of any capital goods produced or manufactured -
(a) in a free trade zone and used for the manufacture of final products in any other place in India; or
(b) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park and used for the manufacture of final products in any place in India, shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods Under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) equivalent to the duty of excise paid on such capital goods.
Explanation - For the purpose of this section, -
(1) "capital goods " means -
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c) moulds and dies, generating sets and weigh-bridges used in the factory of the manufacturer.
(2) "Specified duty" means duty of excise or the additional duty Under Section 3 of the Customs Tariff Act, 1975 (51 of 1975)."
The contention of the appellants is that cement and steel structure are being used in fabrication of blast furnace which is a complete equipment itself and the Modvat credit is admissible for components of blast furnace which will be used in manufacture of the final product. According to the appellants, the cement and steel structure have a vital and peculiar role to play in the fabrication of the blast furnace. The steel structure are used in the fabrication of the shell as well as in the various components of blast furnace such as hearth, body, shaft, throat, uptakes, etc. and the cement is used in foundation of the blast furnace. Honourable Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur reported in AIR 1965 Supreme Court 1310 held that building materials used as raw materials for construction of a plant cannot be said to be used as plant in the manufacture of goods. The legislature has contemplated that the goods must be intended for use as raw materials or as plant or as equipment in -* manufacture or processing of goods and it cannot be said that building materials fall with the description.
6. Rule 57Q provides that capital goods mean machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing [of] any goods or for bringing about any change in any substance for the manufacture of final products. The argument of the appellants that cement and steel structure are the part of the blast furnace which is a plant in itself is not acceptable in view of the decision of the Honourable Supreme Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Limited (supra) where the Honourable Supreme Court held that building material used as raw material for construction of plant cannot be said to be used as plant in the manufacture of goods. The cement and steel structure used in erection of the blast furnace is a building material. In view of the above discussion, we do not find any infirmity in the impugned order and the appeal is dismissed.