Commissioner Customs and Central Excise Raipur vs Grasim Cement

Heard learned counsel for the parties.

This reference has been filed u/s 35-H(1) of the Central Excise Act, 1944 (for short "the Act, 1944") seeking a direction to the Customs, Excise and Gold (Control) Appellate Tribunal (for short "the Tribunal") to refer, inter alia, the following questions of law (i) "whether the pollution control equipments are essential ingredients being machine, 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 product i.e. cement, to fall within the definition of `capital goods'' in terms of explanation to 57-Q (1) of the Central Excise Rules, 1944 (for short "the Rules, 1944");" and (ii) "whether the material handling machinery/equipments are used for producing or processing of any goods or for the process of final product or bringing about any change in any substance for the manufacture of final product, or used after production or processing of the goods, to fall within the definition of `capital goods'' in terms of explanation to 57-Q (1) of the Rules, 1944 ?".

On perusal of the reasons assigned by the Tribunal, it appears, that the items namely; Speed Controllers/Transducers/Electrical Speed Switch, Bus Duct/Transformer Chocks/Solonoid, Parts of PCC/Power Control, Electric Appliances/Items/Electronic Equipment GI Earthing Stripe, Static Convertor, Capacitor Insulator, L.M. Cabinets/Lead Acid Battery, Material Handling Machinery/Equipments and Pollution Control Equipments had been held as `capital goods'', as used in the explanation to 57-Q (1) of the Rules, 1944.

We have examined the use and functioning of the above-stated goods. We found that the above-stated goods, except the pollution control equipments and the material handling equipments are used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product i.e. cement in the instant case. Thus, the same does not raise any substantial question of law directing the Tribunal to refer the same to this Court for adjudication under the provisions of the Act, 1944.

The Tribunal has not assigned the reasons as to how the pollution control equipments are an essential part or are a machine, 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 product i.e. cement, in the present case. The pollution control equipment, may, at the most, be relevant to maintain un-polluted atmosphere by not emitting the polluted gas, water, etc. The pollution control equipments may be a facilitator, but it cannot be held as used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product. Thus, the finding of the Tribunal in respect of pollution control equipments is doubtful.

In respect of the material handling machinery/equipment, it is also not explained as to how the material handling equipments are used for producing or processing of any goods or for the process of final product or bringing about any change in any substance for the manufacture of final product. For want of complete factual details, the decision of the Tribunal seems to be erroneous.

The Supreme Court in Central Excise, Coimbatore & Others v. Jawahar Mills Ltd. & Others observed as under :

The aforesaid definition of "capital goods" is very wide. Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be "capital goods", and, therefore, qualify for availing MODVAT credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be "capital goods" and qualify for MODVAT credit entitlement. Clause (c) makes moulds and dies, generating sets and weighbridges used in the factory of the manufacturers as capital goods and thus qualify for availing MODVAT credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the Explanation is very liberal.

In view of foregoing, the application is allowed in-part directing the Tribunal to draw the statement of facts and refer the substantial questions of law, as aforestated, to this Court under the provisions of the Central Excise Act, 1944.