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Rajasthan High Court · body

2005 DIGILAW 1847 (RAJ)

Union of India v. Raj Spinning Weaving Mills Ltd.

2005-07-20

R.S.CHAUHAN

body2005
Judgment 1. Pursuant to the direction of this Court dated 17.02.2003 in D.B. Civil Reference No. 23/2001, the Customs Excise and Service Tax Appellate Tribunal, New Delhi had submitted statement of facts and referred the following question of law: “Whether in the facts and circumstances of the case, the chemicals used for cleaning D.G. Set in the plant of the Assessee can be construed as inputs in respect of which Modvat Credit can be availed of by the Assessee under Rules 57-A and 57-B? 2. The respondent-assessee is manufacturing yarn falling under Chapters 54 and 55 of the Schedule to the Central Excise Tariff Act. They availed of Modvat Credit of the duty. During the month of June 1998, they had taken the Modvat Credit of the duty paid on chemical namely Aquat which was used for cleaning of D.G. Set in their plant treating the same as capital goods under erstwhile Rule 57-Q of the Central Excise Rules. 3. The learned Assistant Commissioner, Central Excise opined that chemicals used for cleaning/maintenance purposes of D.G. Set, cannot be treated as part/component or accessory of D.G. set, therefore, chemical in question cannot be treated as input under Rule 57-A/ 57-B. 4. However, the Commissioner (Appeals), Central Excise agreed with the Tribunal and held that the chemical in question which was used for cleaning/maintenance of D.G. set, which was being used for the purposes of supply of energy to the plant of the assessee, amounts to accessory within the meaning of capital goods as defined under the provisions of Central Excise Rules. Consequently, the same were held eligible for availing Modvat Credit by the assessee. 5. The Tribunal vide its earlier decision in the case of C.C.E., Meerut vs. Modi Rubber Ltd., reported in 2000 (38) RLT page 798 had confirmed the order of the Commissioner and rejected the appeal filed by the Revenue. 6. On an application being made to this Court under Section 35-H of the Central Excise Act, 1944, the aforesaid question was directed to be referred to this Court for its consideration. 7. It has been brought to our notice that the question what is meant by “accessory”, which has been included in the definition of capital goods, has been subject matter of consideration by this Court in Union of India vs. Rishabhdev Textiles reported in 2002 (141) ELT page 352 (Raj). 7. It has been brought to our notice that the question what is meant by “accessory”, which has been included in the definition of capital goods, has been subject matter of consideration by this Court in Union of India vs. Rishabhdev Textiles reported in 2002 (141) ELT page 352 (Raj). The aforesaid case related to claim of Modvat Credit by the assessee in respect of voltage regulators claiming them to be the accessory of its D.G. set which was considered essential for stabilizing the flow of electricity for the proper functioning and maintenance of the machines in order to achieve a regular and proper production of the final product, as the power fluctuations are bound to cause damage to the machine. This Court relying on the dictum of the Supreme Court in Commissioner of C.Ex., Coimbatore vs. Jawahar Mills Ltd., reported in 2001 (132) ELT Page 3 (SC) had opined that: “In view of his universal meaning of the expression “accessory” which can be assigned to the equipment which is used as agenda or adjunct, not essential but which adds to its efficiency and wide meaning adopted by the Courts universally, and keeping in view in the context of definition of capital goods given in Explanation to Rule 57-Q, the finding recorded by the Commissioner, Central Excise (Appeals) about the user to which the voltage regulator/voltage stabilizer in question is put for efficient use of machines used in the manufacture of textiles by the assessee, the answer to the question referred to the Court by the applicant to us appears self evident and obvious i.e., to say that the articles in question are capital goods as accessories of the machines used for the purpose of manufacture of textiles by the assessee and are entitled to Modvat credit in respect thereof under Rule 57-Q.” 8. In the case of Jawahar Mills (Supra), the Supreme Court has observed as under, after referring to the Rule 57-Q and definition of “Capital Goods”: “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. 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 purpose enumerated therein would also be “Capital goods” and qualify for Modvat Credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh-bridges used in the factory of the manufacturer 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”. The Court further observed that: “They had no difficulty in accepting the contention of the learned Additional Solicitor General that, “under these circumstances, user will determine whether an item qualifies or not the requirement of Clause (a).” 9. Apparently on the findings recorded by the Tribunal and the Commissioner, there is no dispute that use of chemical in question is essential for maintenance of D.G. set which is essential for keeping up the production activity in the factory to be carried on by the assessee. 10. That being the position, the user of chemical for the purpose of efficient discharge of function by the D.G. set qualifies in for Modvat Credit. 11. Accordingly, we answer the question referred to us in affirmative and hold that the Tribunal was right in the facts and circumstance of the case to hold the chemical in question as inputs on which the Modvat Credit can be availed of by the assessee. 12. There shall be no order as to costs.