V.K. Ashtana, Member (T)
1. This is a Revenue appeal against Order-in-Appeal No. 239/97 (M), dated 14-10-1997 passed by Commissioner (Appeals) wherein certain items were allowed as capital goods under Rule 57Q. These are as follows :-
(1) Cables
(2) Auto Rectifier Transformer and Transductor
(3) Terminal Boards
(4) Charger with Amplifier
(5) Annunciator Cards and
(6) Bearings (Ball bearing)
2. Heard Ms. Aruna Gupta, ld. DR., who submits that as mentioned in the grounds of appeal, the above items are not directly involved in the production of excisable goods. Neither are the parts and accessories of such goods in view of specific functions of these 6 items. They are also not specifically included in Clause 1(c) and 1(d) of Explanation to Rule 57Q. Furthermore, since the Transformer is a 33KV, therefore this capacity does not exceed 75 KVA which alone are included as capital goods as per Clause l(d)(vi) of Explanation to Rule 57Q. Therefore, the order-in-appeal needs to be set aside.
3. Shri S. Sekhar, Shri R. Gokul, and Shri R. Lakshminarayanan appear on behalf of the respondents. They submit written submissions for each of these 6 items and reiterates the same.
4. We have carefully considered these submissions of both sides and the records of the case.
5. With respect to Cables, we find that the issue is now settled by the decision of the Larger Bench in the case of Jawahar Mills Ltd v. C.C.E. as reported in 1999 (108) E.L.T. 47 (T) . In the present case, the cables are used to connect lighting systems conveying current to machines, motors etc. which are all integral to the running of the plant round the clock throughout the year. In view of this ratio of the decision of the Larger Bench in Jawahar Mills Ltd., we find that Modvat credit has been correctly given to Cables under Rule 57Q.
6. With respect to Auto Rectifier Transformer and Transductor respondents show us the original Central Excise Invoice under which the said transformer was cleared to the present respondents under Challan No. 28500097, dated 31-5-1995. We have perused the same and find that the description on this Central Excise statutory records itself, as defaced by the Superintendent of Central Excise as Modvat credit was taken, is to the effect that the transformer is 25 MVA 33KV. The respondents have submitted that the capacity of the transformer is measured in terms of volts-amperes and not in terms of voltage alone. Therefore it is evidenced from this piece of evidence that transformer was capable of handling toads upto 25 Mega Voltage Ampere which is many times more than the Kilo Voltage Ampere prescribed in the said notification. The words ’33KV would merely define the maximum voltage which it is capable of handling the load and would not relate to the capacity. Therefore, we are convinced that Modvat credit has been rightly given under Rule 57Q as the said transformer would fall within the ambit of Clause l(d) (vi) of the Explanation to Rule 57Q of Central Excise Act. We also find that Auto Rectifier and Transductors are integral parts of the transformers. The Rectifier rectifies the Alternating Current into Direct Current. These are necessarily involved in running of the Etectrolysis Process without which Caustic Soda cannot be manufactured. Therefore, it is clear that there is no error in the order-in-appeal impugned on this count.
7. In respect of Terminal Boards, we find that these have been described as parts of Electric Motors. The terminal board is where the electric current passes from the power source to the electric motor and without this, electric motor itself cannot be energised. Therefore, we find that it is an integral part of the electric motor. Respondents have also submitted that these electric motors are basically used for handling of raw materials and intermediate materials like brine, chlorine, mercury and also to handle certain gases like hydrogen all of which are required for the manufacturing process and without which the final product cannot be manufactured. Therefore, we find that the Terminal Boards is an integral part of the electric motors which in turn are used mainly to handle the raw materials and intermediate products and are clearly eligible for Modvat credit under Rule 57Q because it is now well settled law that items which are used in handling of raw materials and intermediate products in a manufacturing process are eligible to Modvat credit under Rule 57Q.
8. Charger with Amplifier : The manufacture of caustic soda is basically through the electrolysis process. In this process, the electrolysis is carried on in various cells. The status of each cell has to be constantly monitored. This is done by certain systems, which also have short circuit eliminator system. When the reaction in the electrolytic cell becomes too hyper, the short circuit system comes into play automatically switching of the current resulting in levelling of chemical reaction. This ensures the safety of the electrolytic cell. It is necessary that this safety system is independent of any normal power supply and therefore it is connected to a battery bank of 25V DC power supply. This battery bank needs to be maintained at a high level of charging so that even in case of power failure the current is always available to this control system and the safety of the cells is ensured. We find that this system ensuring proper functioning of the electrolytic cell is an integral part to the process of manufacture of the final product namely Caustic Soda. Therefore, we have no doubt in our mind that the same is eligible for Modvat credit under Rule 57Q. Therefore, on this count also, we do not find any infirmity in the order impugned.
9. Annunciator Cards : Similar function is performed by the Electrolytic Cell which trigger off alarming on the control panel in case the mercury cell is not acting as per normal conditions. We also find that this issue is already covered by the decision of the Tribunal in the case of Star Paper Mills Ltd v. C.C.E., as in 1998 (102) E.L.T. 384 (T) which had considered the solid state alarming annunciator as eligible under Rule 57Q. Therefore, for the reasons noted above and also following the ratio of this decision, we do not find any infirmity in the order-in-appeal impugned on this count.
10. Bearings : We find that this is already covered by the decision of the Tribunal in the case of Century Cements Ltd v. C.C.E., as in 1997 (95) E.L.T. 655 (T) wherein it was held that mechanical spares used in various types of machines for the manufacture of end product would be eligible for Modvat credit and have been helped to drive bearings and gear machinery etc. In the present case, bearings are spares, which are used to maintain the equipments connected for handling of raw materials and intermediate products like Brine Pump, Chlorine Liquifier, Hydrogen Blower etc. Therefore, we find that Modvat credit has been rightly given to these bearings under Rule 57Q by the order-in-appeal impugned in view of the said decision.
11. In view of the aforesaid findings, we do not find any infirmity in the order-in-appeal impugned holding that the above 6 items are eligible for Modvat credit and therefore we find no merit in the Revenue appeal which compels us to interfere with the said order. The appeal is therefore rejected.