ORDER
J.H. Joglekar, Member (J)
1. The appellant imported on automatic painting machine in CKD form. Although the individual packages contained components, in terms of the Interpretative Note 2A of the Rules of Interpretation of the tariff, the goods were classified under heading 84.24 as complete machines. This import was during September, 1998. The appellants also procured other machines falling under 84.24 which were manufactured in India and were purchased as fully assembled pieces. These were received during the period 01/08/1928 to 14/02/1999. Capital goods modvat credit of Rs.1,98,28,732/- was taken by the appellants in April, 1999. Show cause notice was issued on 20th September, 1999 seeking reversal of the credit so taken on the ground that on the date of receipt of the goods during the factory the table annexed to Rule 57Q excluded goods falling under heading 84.24. The Dy. Commissioner upheld the allegation relying upon the Tribunal judgment in the case of PMP Textile Spinning Mills Ltd. Vs. CCE 1999 (108) ELT 698. On his confirming the duty and imposing penalty of Rs. 10 lakhs the assessee filed an appeal. The Commissioner relying upon the same judgment upheld the confirmation of the duty but remitted the penalty imposed relying upon the Supreme Court judgment reported in 1980 (6) ELT 295. The present appeal is filed against this order.
2. Shri Sridharan submits that in terms of Rule 57Q(7) as also from the pre-amble of the said rule it is evident that the criterion for the benefit thereunder is one use and not of the point of receipt. We have seen the pre-amble to the rule. In our opinion the phrase “use in the factory” is descriptive of the inputs and not suggestive of its admission. We observe that the same phrase occurs in Rule 57A also.
3. Rule 57A(7) which was in existence on the date on which the goods were imported and brought into the factory read as follows:
“the credit of the specified duty on capital goods …..and received in the factory on or after the 1st day of January, 1996 shall not be taken on the date prior to the date on such capital goods are installed or as the case may be, used for manufacture of export goods in the factory of the manufacturer…..”
4. Shri Sridharan submits that when the cited judgment in the case of PMP Textile Spinning Mills Ltd. Vs. CCE was delivered, there was no provision or the nature of sub-rule (7). We have seen the judgment. The opinion expressed in the sub-rule in that said judgment is the precursor to the prohibition imposed under the sub-rule.
5. The sub-rule gives two conditions for denial of the credit. The first condition is that the goods must have been received (emphasis supplied) in the factory. The second is that such capital goods should have been installed or used in the further manufacture. Physical receipt of the goods is the pre-condition and therefore the availability of the notification in terms of the table would be governed by the date on which the goods were received. It is not contested or denied that on the dates on which the goods were received in the factory the table to the Rule 57Q(1) did not cover such goods falling under 84.24. Thus at the threshold stage the subject goods failed the test of the said rule. The denial of the credit on this ground is correct and upheld.
6. Shri Sridharan has another arguments. He submits that the automatic painting machine imported by the appellants was admittedly in the form of component parts. It is claimed that such parts fall under the purview of Rule 57A as “inputs”. In this respect he places reliance on judgment of the Tribunal in 1996 (86) ELT 613. He points out that this judgment was approved by the Patna High Court subsequently in disposal of a reference application. It was put to Shri Sridharan that if parts were imported as a machine in CKD condition and had discharged the burden of duty as a machine, how now the prayer could be made for availment of modvat credit as available on parts. Shri Sridharan then relies upon certain judgments of the Tribunal. We have examined these judgments.
7. In the judgment in the case of CCE Vs. Maruti Udyog Ltd. 1996 (16) RLT 646 the Tribunal, per majority held that even where the components of a car were imported and were classified as a car in CKD condition for the purpose of tariff classification, the parts were eligible for benefit of notification granting concession to “parts”. He also relied upon the Tribunal judgment reported Majestic Auto Ltd. Vs. CCE 2001 (42) ELT 149. In this judgment it was held that even where duty had been paid on parts of motorcycles as a motorcycle in CKD condition the subsequent assembly thereof amounted to “manufacture” in terms of Section 2(f) of the Central Excise Act, 1944 in pursuance of Note 6 to Section XVII of the Central Excise Tariff Act, 1982. The same view was held by the Tribunal while dealing with fax machines in the case of in Xerox Modicorp Ltd. Vs. CCE 2001 (42) RLT 706.
8. The combined reading of the judgment would indicate that even if for the purpose of customs classification, parts imported were classified as machines in CKD condition, benefit available under the Modvat Scheme to parts could not be denied just because the assessment was done as complete machines.
9. There would be no procedural difficulties in the assessee’s claiming the benefit under Rule 57A. It is clear from the judgment of the Tribunal in the case of CCE Vs. Modi Rubber Ltd. 2000 (119) RLT 197 that the Tribunal approved the ratio of the judgment in the case of Devyani Beverages Ltd. Vs. Commissioner 1999 (33) RLT 73 in which the bench had held that the declaration filed by the assessee in terms of Rule 57Q was sufficient for the purpose of expending credit on glass bottles which was inputs within the definition of Rule 57H. We make it clear that the benefit of the alternate claim under Rule 57A would be limited to the machines imported in CKD condition (serial No.1 contained in the order-in-original) and would not extend to the machines locally acquired (shown at serial No. 2 to 10).
10. The appeal is partly allowed. The benefit of the additional duty of customs paid on the imported machines shall be allowed as credit under Rule 57A. The denial of credit on indigenously acquired machine is upheld.