Commissioner of Central Excise vs Madras Aluminium Co. Ltd.

G.M. Akbar Ali, J.—Appeal filed against the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai in No. 719/2005, dated 10.5.2005. The respondent/assessee are holding Central Excise Registration Certificate No. 01/92 and are engaged in the manufacture of Aluminium and articles thereof falling under Chapter Nos. 76, 26, 28, 38 & 81 of Schedule to the Central Excise Tariff Act, 1985. On verification of RT 12 submitted by the assessee for the months of July 1995 to November 1995, it was noticed that they have taken credit of duty in RG 23C Registers.

According to the Jurisdictional Superintendent, the goods referred above do not either bring about any change in the material used in the manufacture of final product or are used for processing of excisable finished product. As such the credit taken on the goods as "capital goods" is in contravention of the provisions of Rule 57Q of Central Excise Rules 1944.

Consequently, a show cause notice was issued on 26.12.1995. Reply was submitted on 23.2.96 stating that the capital goods is in order and are used in the manufacture of final products by enclosing detailed usage of each and every item mentioned in the show cause notice.

The Assistant Commissioner, Central Excise, who adjudicated the matter, allowed credit in respect of certain items and disallowed for some items. The order reads as follows:

"I disallow the credit to the tune of Rs. 3,88,635/- being the ineligible credit for the items Sl. No. 10.3: 10.15:10.33: 10.35: and 10.26 to 10.31: under Rule 57U of CER 1944. For the remaining amount, the proceedings are dropped."

This includes MS Flats, Plates and Angles which are the subject matter of the present appeal.

The Commissioner (Appeal), who heard the case of the respondent/assessee, seeking the benefit of Modvat credit on capital goods, which were not accepted by the original authority, came to the conclusion that MS MS Flats, Plates and Angles are eligible for Modvat Credit and held as follows:

"6.2.6 MS Flats, Plates and Angles

The lower authority held that the impugned items were used for fabrication Le., patch work structural and they cannot be considered either as parts of cell or as capital goods and disallowed the credit by following the decision rendered in the case of Vivek Allooys Ltd. v. CCE Coimbatore reported in 1998(98) ELT 156.1 find the said the decision was distinguished by the Tribunal in the case of JK Cement Works v. CCE Jaipur reported in 2000 (116) ELT 52 (Tri. - Del) holding that plain plates used for repairing the worn out/broken parts of the kiln shell eligible to modvat as kiln is a part of the plant in the factory. The ratio of the said decision was followed in the case of Gangeshwar Ltd. v. CCE Meerut, reported in 2002 (150) ELT 242. In respect of the very same appellant the Hon''ble Tribunal, Chennai- 2001 (136) ELT 182 has held that the impugned items in question are eligible for modvat credit. Hence I hold that they are entitled for modvat credit."

Against which, the Department went on appeal before the Tribunal and contended that M.S. Flats, Plates and Angles (Chapter 73 of the CETA Schedule) used by the assessee for replacing worn out parts of their electrolytic cell during the period July to November 1995 were eligible for capital goods credit under Rule 57Q of the Central Excise Rules, 1944. The Tribunal held as follows:

"The Tribunal has held these goods to be eligible for capital goods credit for a period prior to 1996. This decision has been followed by the Commissioner (Appeals) to allow Modvat Credit to the respondents in respect of the aforesaid goods for the aforesaid period. Hence the present appeal by the Revenue saying that the department has filed a reference application in the High Court against the above decision of the Tribunal. The appellant has no case that the High Court has stayed the operation of the above decision of the Tribunal rendered in favour of the present respondents.

Following the Tribunal''s decision reported in 2001 (136) ELT 182 (Tri-Chennai) , I sustain the impugned order and reject the appeal filed by the Revenue."

Aggrieved against the same, the Revenue has filed the present appeal and on admitting the appeal, the following substantial questions of law were formulated:

"(a) Whether the Hon''ble Tribunal is right in allowing Modvat credit, holding that M.S. Flats, Plates and Angles falling under Chapter 73 are pack of the capital goods as per the erstwhile rule 57Q of the Central Excise Rules, 1944?

(b) Whether the Hon''ble Tribunal is correct in holding that M.S. Flats, Plates and Angles as Capital Goods, entitled to credit under Rule 57Q, in the absence of a express provisions in the Rule?"

The question is whether M.S. Flats, Plates and Angles used as a capital goods are entitled to the benefit of modvat credit under sec. 57Q.

This question is already covered by the decision of this court in C.M.A. No. 1265 of 2014, dated 10.7.2014, which followed the case of CCE v. Rajasihan Spg. & Wvg. Milk Ltd. [2010] 27 STT 451 (SC), wherein, in paragraphs 12 and 13, the Apex Court had applied the user test by relying on the ratio propounded in Jawahar Mills''s case, wherein, it is held that steel plates and M.S. Channels used in the fabrication of chimney would fall within the ambit of "capital goods". In the light of the earlier decision in the assessee''s own case and there being no new circumstance or decision in favour of the Revenue, we do not find any good ground to take a different view.

Therefore, we hold that the Tribunal is right in rejecting the plea of the Revenue as the items form part of the final products of the manufacturing goods. We answer the question of law against the Revenue and in favour of the assessee. In the result, the appeal is dismissed and the order passed by the by the Customs, Excise and Service Tax Appellate Tribunal, Chennai in No. 719/2005, dated 10.5.2005 is confirmed. No costs.