Hon'ble Aditya Nath Mittal,J.
1. We have heard Sri Shubham Agarwal for the appellant. Sri R.C. Shukla appears for the respondents.
2. This Central Excise Appeal under Section 35-G of the Central Excise Act is directed against the order of the Customs Excise Service Tax Appellate Tribunal, New Delhi dated 28.01.2004. The appellant has raised substantial questions of law to be considered by the Court, which are summarized in question Nos. 1 and 2 as follows:-
"1. Whether the Tribunal was justified in confirming the order regarding dis-allowance of Modvat-credit on HR/MS/GC sheets plates/angles/channels/supporting structure etc when the use of the same was specifically given at the time of adjudication proceedings and the same has been reproduced in the order of the Asstt. Commissioner of Central Excise?
2. Whether the Tribunal was justified in holding that HR/MS/GC sheets plates/angles/ channels/ supporting structure etc are not part and accessories of the capital goods installed in the factory. When even the Asstt. Commissioner of Central Excise admitted that these goods are used in the machine?"
3. The appellant-assessee claimed Modvat-credit on the HR/MS/GC sheets/ plates/angles/ channels/supporting structure etc., used mainly in boiler/centrifugal machine/crystaliser/juice heater as an accessory/components of these machines, for making shades and fabrication of various items including staging/supporting structure and repair of the plants of the machinery including replacement of worn out parts. The Adjudicating Officer did not allow the Modvat-credit on these goods. The Appellate Authority confirmed the order of the Adjudicating Officer on the ground as follows:-
"The appellant has intimated that HR/MS/GC sheets/plates/angles/channels/supporting structure etc., are used mainly in boiler/centrifugal machine/crystaliser/juice heater as an accessory/components of these machines, for making shades, fabrication of various items including staging/supporting structure and repair of the plants of the machinery including replacement of worn out parts. The appellant has not mentioned the specific role of these capital goods in their factory. Rather, their submission is contradictory in itself as they have mentioned that these are used as component/accessory of the machines as well as raw material for shades/staging structures and thus it is observed that they have given its usage with the intention to avail the benefit of modvat. The appellant has not specified the particular use of these goods, which is required to determine the eligibility as capital goods. Even the role of the particular lot in question should be given as these goods have multifarious application. The Hon'be Tribunal in the case of Rosa Sugar Works Vs. CCE Kanpur 1999 (114) ELT 950 (TRI) has held "The appellants have not placed any corroborative evidence on record regarding the precise use of these item. Fabrication/construction materials have been held by the Tribunal as not being covered by the definition of capital goods under Rule 57 Q. Items used for repairing damaged parts of already manufactured capital goods are also not covered by the definition of capital goods".
There is a clear cut distinction between the raw material of capital goods and parts/components thereof e.g. Steel is the raw material of bus being the constituent of its body but it is not the parts/components thereof. The piston, gear box, break shoes etc are the component/parts of he bus but these are not the raw material of bus. Component/parts is a complete goods in itself and ready to use without requiring any further processing. Considering the nature and general application of the disputed items, it is observed that these cannot be used as such as a components/parts. As such these can be a raw material of the capital goods but not the components/spares thereof. In terms of Rule 57 Q, a component, parts, spares of the machine, plant are the eligible capital goods but not the raw material of the capital goods. The Hon'ble Tribunal in the case of Ganga Kisan Sahakari Chini Mills Ltd Vs. CCE Meerut 1998 (103) ELT 638 (TRI) has held that Steel Sheets used in the manufacture of molasses tank are inputs of molasses tank and not its parts, spares or plant and equipment - credit not available under Rule 57 Q of Central Excise Rules 1944. Accordingly, it is observed that the adjudicating authority has correctly denied the Modvat-Credit on these goods on the ground that party's contention is misconceived as by no stretch of imagination these cannot be treated as component/accessory."
4. Sri Shubham Agarwal has relied upon Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd [2010 (255) ELT 481 (SC)], in which the Supreme Court held that the steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set will qualify for Modvat-credit as accessory to goods specified as 'capital goods', on the ground that there is no dispute that chimney attached to diesel generating set is covered by items at Sl. No.5 of the goods described in column (2) of the table appended to Rule 57 Q by notification dated 1.3.1997. The Supreme Court relied upon Commissioner of Central Excise, Coimbatore & Others Vs. Jawahar Mills Ltd & others [(2001) 6 SCC 274] in which applying the 'user test' to find out whether or not particular goods is said to be 'capital goods', it was held in para 13 as follows:-
"13. Applying the "user test" on the facts in hand, we have no hesitation in holding that the steel plates and M.S. Channels, used in the fabrication of chimney would fall within the ambit of "capital goods" as contemplated in Rule 57Q. It is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of serial No.5 of the goods described in column (2) of the Table below Rule 57Q."
5. The judgment of the Supreme Court in Rajasthan Spinning & Weaving Mills Ltd (Supra) was followed by Chhattisgarh High Court in Union of India Vs. Associated Cement Company Ltd [2011 (267) ELT 55 (Chhattisgarh)] for allowing modvat credit on capital goods, namely, wear plate, HRSS plate, MS plate, angles, channels, etc., used for connecting/fitting fans, casing, ducting in kilns for the manufacture of intermediate product 'clinker'.
6. Sri Shubham Agarwal has relied on Commissioner of Central Excise & Custom, Vishakhapatnam-I Vs. Rashtriya Ispat Nigam Ltd [2011 (338) ELT 338 (A.P)], in which it was held that the goods namely steel sheets and coal were admittedly found to be used as capital goods in the factory in the manufacturer and as such fall within the ambit of Section 2 (b) (iii) of the CENVAT Credit Rules.
7. Sri Agarwal also relies on Commissioner of Central Excise, Coimbatore & Others Vs. Jawahar Mills Ltd & others [2001 (132) ELT 3 (SC) = (2001) 6 SCC 274] in submitting that capital goods can be machine, machinery, plant equipment, apparatus, tools or appliances. If any of these goods used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final produce would 'capital goods', and qualify for Modvat credit.
8. We have considered the cases cited by the counsel for the appellant, and do not find that the items in the present case fall within the meaning of capital goods as defined in explanation to Rule 57Q of the Central Excise Rules, 1944. Rule 57 Q is quoted below:-
"57Q. 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 utilizing the credit so allowed towards payment of duty of excise leviable in the final products, or as the case may be, on such capital goods, if such capital goods have been permitted to be cleaned under rule 57S, 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 ElectronicHardware 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 purposes 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.
(1) `specified duty' means duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975).
(2) Notwithstanding anything contained in sub-rule (1), no credit of the specified duty paid on capital goods shall be allowed if such duty has been paid on such capital goods before the 1st day of March, 1994."
9. The goods in the present case do not fall within the meaning of Explanation 1 (a) of Rule 58 Q. We also find that Explanation 1 (b) of Rule 58 Q is not attracted to the goods in the present case inasmuch as 'capital goods' in Explanation 1 (b) includes component, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose. The words 'aforesaid' used in Explanation 1 (b) refer to the 'capital goods' included in Explanation 1 (a), namely, 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.
10. In the present case, the goods in question are neither used for producing nor for processing of any goods or bringing about any change in any substance for the manufacture of final products. The reasons given by the Supreme Court in Jawahar Mills Ltd (Supra) followed in Rajasthan Spinning & Weaving Mills Ltd (Supra) is on the user test, which was in respect of goods in fabrication of chimney, which is an integral part of the diesel generating plants. The Supreme Court explained that these items, required for fabrication of chimney, are essential to the factory, particularly when the pollution control laws make it mandatory that the plants which emit effluents should be so equipped with apparatus, which can reduce or get rid of the effluent gases, and any item used for the said purpose has to be treated as an accessory in terms of Serial No. 5 of the goods described in the table appended to Rule 57 Q. Such is not the case, in respect of the goods on which Modvat-credit is claimed by the appellant.
11. On the aforesaid discussion, we do not find any error of law in the order of the Customs Excise Service Tax Appellate Tribunal. Both the question Nos. 1 and 2 are decided against the appellant-company.
12. The Central Excise Appeal is accordingly dismissed.
Order Date :- 4.9.2012 nethra