Customs, Excise and Gold Tribunal - Tamil Nadu
Andhra Pradesh Paper Mills Ltd And Cce, ... vs Commissioner Of C.Ex., Hyderabad And ... on 23 July, 2001
Equivalent citations: 2001(77)ECC533, 2001(137)ELT1103(TRI-CHENNAI)
ORDER
Shri S.L. Peeran
1. Assessee's appeals and two revenue appeals raise a common question of law with regard to grant and disallowance of modvat credit on transformers and spares of boilers. Hence, they are taken up together as per law.
2. With regard to party's appeal No. 1212/96, and Revenue appeal No. 1326/96 both arises from common OIA No. 53/96 (G) CE dated 10.6.96 passed by the CC & CEX (Appeals), Hyderabad. In his order, the Commissioner has held that assessees are entitled to modvat credit in respect of spares used as capital goods in the manufacture of paper and paper boards. However, with regard to transformers, he has observed that it was used in the factory of production prior to 16.3.95 and in terms of Rule 57Q, it cannot be considered as capital goods and said rule came into effect only from 16.3.95.
3. Learned Counsel submits that the Tribunal has already decided the issue pertaining to grant of modvat credit which have been brought prior to 1.3.94, even though no specific provision under Rule 57Q has been mentioned, as decided by this Bench in the case of CCE Guntur Vs KCP Limited on the basis of earlier judgement of the Tribunal rendered in COASTAL PAPER MILLS Vs CCE and Trade Notice No. 194/94 dated 21.12.94. He therefore seeks for applying the ratton of said judgements. He also refers to Larger Bench judgement of JAYPEE REWA CEMENT Vs COMMISSIONER- 1997(95) ELT 429(T) which has been taken into consideration in the case of CCE Vs KCP Ltd.
4. Heard Ld. SDR on the assessee's appeal with regard to denial of modvat credit on transformer which was procured prior to 16.3.95.
5. We notice that the issue is covered by the judgement of CCE Vs KCP Ltd. rendered by this Bench reported in 2000 (122) ELT 879 (T) wherein the larger bench judgement of JAYPEE REWA CEMENT Vs COMMR. 2000 (11) ELT 456 (T-LB) has been cited and other trade notices. Therefore, applying the ratio of the said judgements, we allow party's appeal with regard to grant of modvat credit on transformers which were used in the factory of production prior to 16.3.95.
6. As regards the Revenue appeal E/1326/96 arising from same Order-in-Appeal, the Commissioner in the impugned order has noted that assessees are entitled to the modvat credit in respect of equipments/spares used in the bleach plant and other small items which are used as spare parts and components in the recover boiler and new bleach plant which has been erected after 1.3.94. On this point, Ld. SDR relies on the grounds made out in the appeal and submits that the Commissioner was not justified in granting the benefit of the modvat credit on these items. He points out to para-5 of the grounds of the appeal wherein it has been held that the AC was justified in disallowing the modvat credit disapproving the assessee's contention. The AC's contention that plant should have been installed prior to 1.3.94 for availing the benefit is a correct and the Commissioner (Appeals) finding to the contrary is not acceptable to the Revenue.
7. Ld. Counsel submits that the above judgement cited by him i.e. with regard to CCE Vs KCP Ltd- 2000 (122) ELT 879 applies to the facts of this case wherein the Revenue appeals were also dismissed on this very ground. He seeks for applying the same ratio.
8. We have carefully considered the submissions made by both sides. We notice that the issue has been gone into in the case of CCE Vs KCP Ltd. (supra). The findings arrived at in para-3 to 6 are reproduced herein below :-
3. On a careful consideration, I notice that the earlier judgment relied by the Commissioner has since been reversed by the Larger Bench of 5 Members and in terms of the ratio of Larger Bench decision, explosives used in Mine operation for excavating limestone are not entitled for the benefit of Modvat credit. Therefore, respectfully following the ratio thereof, the impugned order is set aside and the appeal is allowed.
4. Appeal E/1809 & 1733/98 raise a common question of law and facts. In both the appeals, appellants had claimed Modvat credit on the ground that the spares, components and accessories received during the period 1-2-1996 to 30-4-1996 which were used in the machine, machineries, plant & equipments and bought before 1-3-1994 are eligible for the benefit of Modvat credit. The Commissioner has noted his earlier order rendered in the case of Coastal Paper Mills v. CCE vide Order-in Appeal No. 47/95 G (C.E.) dated 17-8-1995 and also Trade Notice No. 194/94 dated 21-12-1994 issued by the Ahmedabad Commissionerate to hold that the Modvat credit is eligible and the Assistant Commissioner should not have ignored the provisions of law. The Commissioner has also noted that there is no other contravention of Modvat rules and the order of the Assistant Commissioner is contrary to the provisions of Rule 57Q. He has noted the assessee's contention that when Rule 57 was incorporated into Central Excise Rules w.e.f. 1-3-1994 providing for Modvat credit on capital goods, the explanation under the Rule contained 3 clauses (a), (b) and (c). Clause (b) covered components, spares and accessories of machinery, plant, equipment mentioned in clauses (a). The clause did not stipulate that only those spares and accessories pertaining to machineries received after 1-3-1994 would alone be eligible for credit.
5. The Revenue are contesting the appeal on the ground that the Commissioner's order in the case of Order No. 47/97 (G) C.E. dated 17-8-95 (Coastal Paper Mills v. CCE) and the Trade Notice No. 194/94 dated 21-12-1994 are contrary to the provisions of Rule 57Q and hence Modvat credit ought not to have been granted.
6. I have heard ld. DR Shri M. Kunhi Kannan who reiterates the contention and strongly prays for setting aside the order as the machines were installed prior to 1-3-94 and the provision does not apply to them. Respondents did not appear despite several notices issued to them. Hence, appeals are taken up for decision on merits.
9. We notice that the issue having been covered by the above judgement, therefore there is no reason to take a different view than what has already been expressed which is in line with the Larger Bench judgement cited therein. In that view of the matter, we do not find any merit in the appeal and dismiss the same.
10. Appeal E/1327/96 has been filed by Revenue against Order-in-Appeal No. 54/96(G) CE dated 10.6.96 by which the Commissioner (Appeals) has been pleased to grant modvat credit in respect of Rotary Twin Lobe Compressor, boiler parts used in the installation of a new recovery boiler and spares to support installation and valve accessories used in the electrostatic precipitator of the new recover boiler. The AC had denied benefit on the ground that these goods do not serve any of the stated purposes under rule 57Q read with explanation thereunder and therefore are not capital goods. The second ground taken by the AC was that said goods are used as components etc. for a plant and machinery which was installed prior to 1.3.94. The third ground taken was that the mills could not clearly state as to how the items are used for producing or processing of goods or for bringing about any change in any substance in the manufacture of final product. Lastly, he has held that spares, components etc. have not accompanied the main machinery and hence are not eligible for modvat credit.
11. Negativing these grounds, the Commissioner (Appeals) in paras had held as follows :-
5. I observe that none of the contentions of the Assistant Commissioner are correct. It is not necessary that each and ever part of a machine should have a direct role in producing or bringing about any change in the goods. To cite an example, a nut or a bolt does not play a direct role in the production of goods. But so long as a component or spare of a machinery does participate in the production of goods, it is deemed to be capital goods under Rule 57 Q. Similarly, a boiler may or may not take part in the production of paper or paper board directly. But without a boiler or a recovery boiler it may not be possible to manufacture the final product. In the present case, the Assistant Commissioner has not given any reason as to why the impugned goods are not capital goods except stating that they do not directly participate int he production of final product. The Assistant Commissioner's contention that the main machinery as well as the components should have been procured only after 1.3.94 for them to be eligible for MODVAT credit under Rule 57 Q has no legal base. It is not necessary that entire plant should be set up only after 1.3.94 to be eligible for MODVAT credit on spares and components procured after that date. The further contention of the Assistant Commissioner that the spares and components must accompany the main goods has no legal base. All machines, machinery, apparatus etc. which are used for production of goods are eligible for MODVAT credit unless they are specifically excluded/restricted from the rule itself. In the present case, the Assistant Commissioner had not held that any of the goods on which MODVAT credit is sought are specifically excluded from the perview of Rule 57Q of Central Excise Rules.
ORDER The order of the Assistant Commissioner is set aside. The appeal is allowed.
12. Ld.SDR takes us through the AC's order which in brief has already been noted above and argues on that basis and on the grounds of appeal made out in this case. He seeks for reversal of the order and for confirmation of AC's order.
13. Ld. Counsel on the other hand submits that the issue is no longer res integra and the matter is covered by the Larger Bench judgement of the Tribunal of JAWAHAR MILLS LTD - 1999 (108) ELT 47 (T-LB) which has been taken note of in similar items on which modvat credit due was granted in the case of CCE Chandigarh Vs BHUPINDRA PAPER MILLS reported in 2000 (116) ELT 255 and that of CCE Meerut Vs NAV BHARAT PAPER MILLS.- 1996 (86) ELT 501. He submits that in view of the matter having been clarified by the Larger Bench and also the matter decided by two judgements cited by him which is in line with the judgement already noted above i.e. in the case of CCE Vs KCP Ltd. there is no ground to interfere with the order of the Commissioner (Appeals). He submits that the Revenue has accepted this order and subsequently AC has granted them relief by Order-in-Original No.12/99 dated 3.3.99 issued on 10.3.99. He filed a copy of the said order to submit that Revenue has not filed any appeal against this order and therefore the issue is settled in their favour.
14. We have carefully considered the submissions made by both sides and have perused the order. We notice that the Larger Bench of Tribunal in the case of JAWAHAR MILLS LTD (supra) has already discussed the issue on the definition of 'capital goods' under Rule 57Q and how the same are required to be treated. The analogy, discussion and reasonings arrived at by the Commissioner (appeals) on these items is in keeping with the Larger Bench judgement of JAWAHAR MILLS LTD and same has since been applied in the case of CCE Vs NAV BHARAT PAPER MILLS and that of CCE Vs BHUPINDRA PAPER MILLS (supra). The issue has also been dealt with tin the case of CCE Vs KCP Ltd which finding has also been extracted above. We have also taken note of the fact that revenue has already accepted the party's contention and the judgement and in subsequent adjudication order No. 12/99 dated 3.3.99 wherein the AC has granted them relief. In view of this, the issue having been covered, and the Revenue having subsequently granted benefit without challenging the same before the appellate authority, therefore there is no merit in this Revenue appeal also and hence same is accordingly rejected.
(Pronounced & dictated in open court)