ORDER
V.P. Gulati, Member (T)
1. These appeals arise out of a common issue and are therefore taken up together for disposal by a common order.
2. Originally, the appellants have filled only one appeal in respect of three orders and as per practice and procedure of the Tribunal, the appellants were asked to file supplementary appeals with a condonation delay applications. The delay in filing of supplementary appeals is condoned inasmuch as one appeal covering all the cases earlier was in time. The short point that arises for consideration in the appeals is whether the Modvat credit is available in respect of the steel barrels in which transformer oil which is ultimately used as a coolant in the transformer is transported.
3. The learned Counsel pleaded that the appellants manufactured transformers and the transformer oil which is sent alongwith the transformers for being used as a coolant at the premises of the buyer. The oil he pleaded is filled into transformers and its life is co-terminus with the life of the transformer. He pleaded that even though the transformer oil is not an eligible input for the MOD VAT credit purpose, since in the assessable value of the transformer value of the transformer oil and the barrels is included for the purpose of levy of excise duty, the benefit of Rule 57A should be allowed to the appellants. He pleaded that the oil sent alongwith the transformer in semi-knock down condition should be treated as a component of the transformer and in terms of explanation to Rule 57A, the benefit of MODVAT credit for the packing material barrels should be allowed in case the value of the same is included in the assessable value. The learned Counsel also placed reliance on the ruling of the Hon’ble Supreme Court in the case of CCE v. Eastend Paper Industries Ltd., reported in 1989 (43) ELT 201 under which it has been held by the Hon’ble Supreme Court that the wrapping paper used in wrapping of said paper is to betreated as a raw material or component part of other variety of paper which is wrapped. He pleaded that Hon’ble Supreme Court has clarified that anything that enters into and forms part of manufacturing process or is required to make the article marketable must be deemed to be raw material or component part of the end-product and must be deemed to have been used in the completion of the end-product.
4. The learned counsel, however, summed up by saying that while excuting sale orders, the sale price of transformer includes the court of transfomer oil and the drums in which it is received and duties are also paid for trasformers inclusive of the value of these items. It was, therefore, urged that transformer oil is an essential component for the functioning of the transformer an that the transformer oil is transported in steel drums or barrels, and which should be construed to be a packaging material for the important and essential component of transformer. For the purpose of benefit of MODVAT credit, the leaned Counsel also placed reliance on the Rule 2(a) of the Rules of Interpretation of schedule to Central Excise Tariff Act, 1985 to contend that even if goods are in semi-assembled or un-assembled condition, it should be deemed to be cleared in assembled condition. Referring to the misc. application, the learned Counsel referred to the objection for inclusion of the value of the oil in the asssable value, which has also been done.
5. The learned DR adopted the reasoning of the impugned order.
6. We observe that the issue to be decided is in the context of use of the transformer oil in the transformers. The appellants’ plea is that the transformer oil; such should be treated as a component part of the transformer and for that reason the benefit of MODVAT credit in respect of packing material used for packing the same should be allowed, as the same is sent at the time of removal of the transformer in SKD condition alongwith the transformer in ten of explanation to Rule 57A. We observe that this Tribunal following the ratio of ruling of Hon’ble Supreme Court in the case of State of U.P. v. Kores Ind. Ltd. reported in 877 Sales Tax Cases Vol. 39 page 8 have held in a number of ses that the ribbon used for teleprinters and the battery cell for watches cannot be treated as a part of the printer or watches. Likewise, before the benefit of MODVAT credit in respect of barrels is considered, we will have to first consider whether transformer oil which is stated to be used for filling in the transformers as a coolant can be considered as a component of the same. It is seen that the transformer oil is not filled in the transformer at the time of clearance of the transformer from the factory but is merely sent alongwith the transformer. The appellants have not shown that in the market and according to trade circles the transformer is not treated as complete unless the oil is filled in it. While it may be accepted that coolant is necessary for the transformers, transformer is an electrical equipment and its manufacture can said to be complete the moment all the electrical components for conversion of the volt age are in place and it can be assembled as such. For making it functional as in the case of a typewriter ribbon mentioned above, the coolant added, therefore, cannot be considered as a component for the purpose of transformer and the question of extending the benefit of MODVAT credit in respect of the barrels is such would not arise.
7. The appellants’ plea is that the value of both the transformer oil and barrels in which it is packed has been included in the assessable value of the transformer and for that reason the benefit of MODVAT credit should be given to them. We observe that so far as the assessable value is concerned, it is fixed under Section 4 and in terms of this section certain elements of cost which may not be relevant to the manufacture of the goods can also be included and the basis for arriving at the assessable value is the condition in which the goods are cleared and certain elements of cost incurred like advertising expenses etc. even get included for arriving at the assessable value. All the considerations which weigh for the purpose of Section 4 may not be relevant for the purpose of consideration of the benefit of MODVAT credit. The MODVAT provisions are a self-contained code and the benefit under these provisions is to be considered in terms of the specific inclusions or exclusions as set out in those provisions and on the interpretation of the scope of these provisions. In the above circumstances, we hold that the learned lower authority has been right in denying the appellants the benefit of MODVAT in respect of the goods in question.
8. The learned Counsel at the end of his arguments made a plea that a direction may be issued that in case MODVAT is not allowed to the appellants, the value of the transformer oil and the drum may not be taken into consideration for the purpose of arriving at the assessable value. We have already observed that the Rule 57A and other MODVAT provisions have to be interpreted based on the scope of these Rules and the consideration relevant for arriving at the assessable value Under Section 4 may not always be relevant for arriving at the conclusion regarding the eligibility to MODVAT credit. In any case he appellants are free to take up the issue of the valuation with the component authorities and we are sure that they will consider the issue under the law.