The Commissioner of Central Excise Central Excise vs India Cements Limited and The Customs, Excise and Service Tax

D. Murugesan, J.—These appeals have been filed by the Revenue raising the following two issues; namely, (i) as to whether the Loader,

Crane with accessories, Cement, Bulldozer fall under the definition of Capital Goods u/s 57Q in order to avail MODVAT credit and (2) Rebar

Coils, CTD Bars and TOR Steel are capital goods within the meaning of the said Rule 57Q?

At the time of admission, this Court had framed the following question of law:

Whether the Tribunal is correct in holding that structural steel items, viz., Rebar Coils, CTD Bars, TOR Steel and Cement used for civil

construction activity, being in the nature of building materials are capital goods eligible for credit in terms of Rule 57Q as it stood at the relevant

time.

The first Respondent/Assessee filed the declarations under Rule 57T for availing credit of duty paid on the capital goods in respect of the

aforesaid items before the Original Authority. On the ground that the aforementioned goods are not in the nature of capital goods within the

purview of Rule 57Q and the declarations should be disallowed, a show cause notice dated 26.02.1996 was issued followed by the original order

dated 02.09.1996, disallowing the declarations.

The first Respondent/Assessee preferred appeals before the Commissioner of Customs and Central Excise (Appeals) and by a common order

dated 17.3.1998 though the Commissioner has accepted the claim of the Assessee for MODVAT credit on the ground that the Bulldozer, Loader

and Crane with accessories are capital goods, but did not agree for such a claim in respect of Rebar Coils, CTD Bars and TOR Steel on the

ground that they are not capital goods, as they are used only for civil construction work.

Being aggrieved by the respective portion of the order of the Commissioner of Appeals, both the Revenue and the first Respondent/Assessee

preferred further appeals to the Customs, Excise & Service Tax Appellate Tribunal. By the impugned common order dated 14.05.2004, the

Tribunal not only upheld the finding as to the entitlement of the Assessee for MODVAT credit in respect of the Crane and Loader, but remanded

the appeal insofar as the Bulldozer is concerned and insofar as the appeal filed by the Assessee is concerned, claiming MODVAT credit on Rebar

coils, CTD Bars, TOR Steel, Joists and Cement, the Tribunal having regard to the law declared by the Apex Court in Commissioner of Central

Excise Coimbatore and Others Vs. Jawahar Mills Ltd. and Others, holding that the explanation (1) to Rule 57Q is to be construed very liberally,

considered the above items as capital goods and ultimately allowed the appeal filed by the Assessee. Under the above circumstances, these Civil

Miscellaneous Appeals are filed at the instance of the Commissioner of Central Excise, Tiruchirapalli.

Rule 57Q reads as under:

Applicability:-(1) the provisions of this section shall apply to goods (hereafter in this section, referred to as the ""final products"") described in column

(3) of the Table given below and to the goods (hereafter, in this section, referred to as ""capital goods""), described in the corresponding entry in

column (2) of the said Table, used in the factory of the manufacture of final products.

S. Description of capital goods Description of

No falling within the schedule to the final products

Central Excise Tariff Act, 1985

(5 of 1986) and used in the

factory of the manufacturer.

-1 -2 -3

1 ............

2

All goods falling under chapter

85 (other than those falling under

heading Nos. 85.09 to 85.13,

85.16 to 85.31, 85.39 and

85.40);

4

5 Components, spares and

accessories of the goods

specified against S. Nos. 1 to 4

above.

As far as the Crane with accessories and Loader are concerned, there cannot be any difficulty in holding that they will come within the items of

machinery or equipment used for production or processing of any goods for the manufacture of final products. As has been held by the Apex

Court in Jawahar Mills Limited''s case, the Rule makes it explicitly clear that the order of the Tribunal in dismissing the appeal preferred by the

Revenue in respect of these two items and remitting the matter for fresh consideration in regard of the Bulldozer requires no consideration. As far

as the other items, namely, Rebar Coils, CTD Bars, TOR Steel and Cement are concerned, as to whether they are capital goods or not, the

Tribunal having regard to the law laid down by the Apex Court in Jawahar Mills''s case, has liberally construed the above Rule and factually found

that these are the items, which are used for the purpose of construction of the plant comprising of concrete foundations, concrete silos for storing

raw materials, clinker and cement, pre-heater tower structure, load centres etc. Having regard to the above factual findings, the Tribunal had found

that these items are not used for civil construction, but for the construction, which are absolutely necessary for establishing a manufacturing unit for

cement.

The question as to how Rule 57Q should be interpreted came up recently before the Apex Court in the judgment reported in Commissioner of

Central Excise, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd., . In paragraphs 12 and 13, while applying the ""user test"" and following the

Jawahar Mills''s case, the Apex court has held that even though steel plates and M.S. Channels used in the fabrication of chimney would fall within

the ambit of ""capital goods"".

The aforesaid judgment makes it clear that the Court should apply liberal test to find out as to whether a particular item would fall under the

definition of ""capital goods"" or not. Having regard to the factual finding of the Tribunal that the above items are used for civil construction, we are

of the considered view that the order of the Tribunal requires no interference. Accordingly, these appeals are dismissed and the question of law

raised in the appeals is answered against the Revenue. No costs.