JUDGMENT
P.G. Chacko, Member (J)
1. M/s. Premier Instruments & Controls Ltd., (M/s. Pricol, for short) are engaged in the manufacture of Oil pumps, Gears, Pinions and Valve assembly and are availing Cenvat credit on inputs and capital goods. During the period from June to December 2002, they took Cenvat credit of Rs. 36,108/- on Plastic crates and P.P. Sheet trays considering these goods as ‘inputs’. The original authority disallowed the credit, holding that the said items did not fit into the definition of “inputs”. Ld. Commissioner (Appeals) took the view that the definition of “input” was wide enough to cover the above items and, accordingly, allowed the credit. Hence the Revenue’s appeal. For the period June-September 2003, Cenvat credit of Rs. 6004/- taken by M/s. Pricol on plastic crates and P.P.sheet trays was also allowed by the Commissioner (Appeals). This time, however, the appellate authority considered the above items as ‘capital goods’. The party has filed appeal No. E/332/2005 for holding that the “crates” and “trays” are ‘inputs’ and not ‘capital goods’.
2. After examining the records and hearing both sides, I note that the short question to be considered in both the appeals is whether the “crates” and “trays” could be considered as “inputs” under the CENVAT Credit Rules 2002. An identical question was considered in appeal No. E/958/2004 [CCE Salem v. PKPN Spinning Mills (P) Ltd.] and, by Final Order No. 888/2005 dt. 24.6.05], it was held that the “plastic” crates which were used by the said assessee for handling materials within their factory could hardly be treated as inputs. Ld.counsel has made an endeavour, in the instant case, to persuade me to hold to the contra. In this connection, he has relied on a few decisions of the Supreme Court and the Tribunal. On the other hand, ld.SDR has sought to distinguish the cases cited by ld.counsel, from the instant case. She has also taken support from the above Final Order No. 888/2005.
3. Admittedly, the “crates” & “trays” were used for storing and handling raw materials, sub-assemblies and finished goods in the assessee’s factory. Similar “crates,” used for similar purpose by another assessee [M/s. PKPN Spinning Mills (P) Ltd.] were held not to be inputs in Final Order No. 888/2005 ibid for the period September 2001 to May 2002. The relevant part of the said final order is extracted below :
4. After giving careful consideration to the submissions, I find that, under Rule 2 (b) of the Cenvat Credit Rules, 2002/2002, “capital goods” for the purpose of Cenvat credit were specified in an exhaustive list, which reads as under :
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.02 and subheading No. 6801.10 of the First Schedule to the Tariff Act;
(i) Components, spares and accessories of the goods specified at (i) above :
(ii) moulds and dies;
(iii) refractories and refractory materials;
(iv) tubes and pipes and fitting thereof;
(v) pollution control equipment; and
(vi) storage tank,
used in the factory of the manufacturers of the final products, but does not include any equipment or appliance used in an office.
5. The ‘plastic crates’ under consideration arc falling under SH 3923.90 of the CETA Schedule and the same are not covered under Sl.No (i) above. The respondents have no case that these plastic crates are components, spares and accessories of any of the goods specified at (i) above, nor do they say that these crates are covered by any of the subsequent entries (iii to vii) above. Hence there is no question of allowing capital goods credit on the plastic crates to the respondents for the aforesaid period. The case of Cheran Spinners (supra) is one which arose under the erstwhile Rule 57Q of the Central Excise Rules, 1944 for the period October 1999. I have found nothing in parallel between the scope of capital goods under Rule 57Q and under Rule 2 ibid. Hence the cited case law is inapplicable. The question which now arises is whether input duty credit could be allowed in lieu of capital goods credit. The lower appellate authority has granted this benefit by relying on the Supreme Court’s decision in J.K. Cotton Spinning and Weaving Mills (supra). That was a case which arose under the Sales Tax Act and the question before the apex court was whether the entire process of converting raw material into finished goods was encompassed in the expression “in the manufacture of goods” used in the relevant provision of the Sales Tax Act. As rightly contended by the appellant, there is nothing in this judgment which would support the view that capital goods used in relation to the manufacture of other goods can be treated as input or raw material. The term “input” has a conventional meaning. It should get wholly or substantially used-up by the time the output emerges. The plastic crates used by the respondents as material handling equipment can hardly be treated as inputs as the definition of “input” under Rule 2 of the Cenvat Credit Rules, 2001/2002 cannot be extended so as to encompass the goods which are conventionally regarded as capital goods. There is a clear dividing line between the two and this aspect was not subject matter of J.K. Cotton Spinning and Weaving Mills (supra).
4. The decisions cited by ld.counsel are not persuasive enough to take a different view on the question under consideration. In the case of Cominco Binani Zinc Ltd v. CCE , aluminium sheets used as cathodes in the electrolytic process of manufacture of final product were held to he ‘inputs’. It was found by the Tribunal that aluminium sheets were replaced from time to time after they lost their utility and that the waste was sold as scrap. It is obvious that the aluminium sheets were used as cathodes till they lost their utility and became waste, unlike the crates and trays which are permanently used by M/s. Pricol for handling materials within their factory. In the case of CCE v. Bimetal Tyres Ltd. 1991 (56) ELT 598 (Tri.), chemicals used for electroplating process were held to be ‘inputs’. Again, it was found, in that case, that the chemicals were consumed in an electrolytic process and had to be replenished from time to time. Ld.counsel has relied on para-12 of the apex court’s judgment in CCE v. Rajasthan State Chemicals Works , which reads as under :
12. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to, manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture.
Their lordships were considering the scope of the expression “in relation to the manufacture” in the above case. They were considering an essentially chemical process consisting of numerous steps/stages. It was held that where any particular step was so integrally connected with the ultimate production of goods, such step could be regarded as “in relation to the manufacture”. In the instant case, M/s. Pricol have not cited any particular “process” or “step” involving the “crates” & “trays”, integrally connected with the ultimate production of their final products. They were using the “crates” and “trays” only for handling materials within their factors and not for handling any “process” involving such materials. Mere handling of any material cannot be held to be a “process”. Other cases cited by ld.counsel are also easily distinguishable on facts.
5. The order impugned in the Revenue’s appeal held the “crates” and “trays” to be inputs and the same cannot be sustained for the reasons recorded in Final Order No. 888/2005. The order impugned in the assessee’s appeal held the above items to be capital goods and, accordingly, allowed Cenvat credit to the assessee. In this appeal, the assessee wants the above items to be declared as inputs. This plea cannot be allowed for the reasons noted in Final order No. 888/2005. The Revenue is not aggrieved against grant of capital goods credit to the assessee, either.
6. In the result, the Revenue’s appeal is allowed and the assessee’s appeal is dismissed.
(operative part of the order was pronounced in open court on 12.1.06)