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Judgment
Heard learned Counsel for the parties.
On a reference petition u/s 35G(3) of the Central Excise Act, 1944, following question is proposed, that should be referred for the opinion of this Court:
"Whether the Tribunal have the power to allow the benefit of the Modvat credit on the goods under Rule 57Q of Central Excise Rules, 1944, which are otherwise not specifically mentioned in the Rules itself?"
Learned Counsel for the respondent submits that similar question has been considered by their Lordships of Supreme Court in Commissioner of Central Excise Coimbatore and Others Vs. Jawahar Mills Ltd. and Others, and recently in Collector of Central Excise, Bangalore Vs. Escorts Mahle Ltd.,
Learned Counsel further submitted that similar question has been considered by this Court in Union of India (UOI) Vs. Rishabhdev Textiles,
The respondent M/s. Birla Jute & Industries Ltd. has claimed the benefit of Modvat credit, claiming that the capital goods in question are used for manufacture of the goods and they are capital goods within the meaning of Rule 57Q of the Central Excise Rules. The respondent has claimed Modvat credit on the following items:
(1) Castables
(2) Electrical goods
(3) Parts of Programme Logic Controller
(4) Items used at mines
(5) P.S. Tank
(6) Yarn for packing
(7) Refractory Mixer
(8) Spare for Compressor
(9) Bolt & Nuts
Considering the submissions made by the respondents, the Tribunal has allowed the benefit of Modvat credit on these items except for P.S. Tank, Refractory Mixer and Bolt & Nuts and summed up the order as follows :
"I sum up the order as follows :
The orders of the Commissioner in regard to the eligibility of electrical items, parts of programme logic controller and yarn for packing are set aside.
The Commissioner''s order in the case of P.S. tanks, refractory mixture and bolts and nuts are upheld."
While considering the definition of capital goods under Rule 57Q of the Central Excise Rules, 1944, their Lordships in the case of Jawahar Mills case (supra) referred the definition of "capital goods", which reads as under :
"57Q Applicability. ..........
Explanation. - For the purposes of this section, -
(1) "capital goods"
(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 weighbridges used in the factory of the manufacturer.
(2) "specified duty" means duty of excise or the additional duty u/s 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."
Their Lordships emphasized on the fact and also referred to their observations in earlier decision of the Apex Court in Indian Farmers Fertiliser Cooperative Limited Vs. Collector of Central Excise, Ahmedabad, that - the exemption notification must be so construed as to give due weight to the liberal language it uses. The ammonia used in water treatment, steam generation and inert gas generation plants. Which are a necessary part of the process of manufacturing urea, must, therefore, be held to be used in the manufacture of ammonia and the raw naphtha used for the manufacture thereof is entitled to the duty exemption,
In para 5, their Lordships observed as under :
"....The question therein was whether ammonia used in the off-site plants was ammonia which "used elsewhere in the manufacture of fertilizers". The off-site plants were held to be part of the process of the manufacture of urea. Relying upon the phraseology used in the exemption notification, it was held that there was no good reason why the exemption should be limited to the raw naphtha used for producing urea that is utilized directly in the urea plant since the notification only required that the ammonia should be used in the manufacture of fertilizers and not that it should be used directly in the manufacture of fertilizers."
Meaning thereby, even if any "capital goods" is used for manufacture of the goods, though that has not been specifically mentioned in Rule 57Q, on that item also the benefit of Modvat credit should be allowed.
Considering the facts stated by the Tribunal and upon perusal of the order of the Tribunal, we find that nowhere the actual use of the items has been denied, for which Modvat credit has been claimed. Considering these facts on record, we see no reason to direct the Tribunal for reference of the proposed question for the opinion of this Court.
The reference petition is hereby rejected.