ORDER
P.G. Chacko, Member (J)
1. These appeals of the Revenue are directed against the grant, by the lower appellate authority, of Modvat credit to the respondents on various items of capital goods under Rule 57Q of the Central Excise Rules, 1944 for the period March 1994 to April 1996. Rule 57Q allowed credit of specified duty paid on the capital goods used by the manufacturer in his factory and enabled him to utilise the credit towards the payment of duty of excise leviable on his final products. During the aforesaid period, the term “capital goods” had the following meaning [vide Explanation 1 to sub-rule (1) of Rule 57Q]:
Explanation :- For the purposes of this section, –
(1) “capital goods” means –
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b) components, spare parts and accessories of the aforesaid mahines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c) moulds and dies, generating sets and weigh-bridges used in the factory of the manufacturer.
2. Appeal No. E/141/99 is against grant of capital goods credit in respect of the following 24 items :-
1. Cast steel valves
2. Control panels
3. Thermotracers
4. Distribution panel
5. HT switch gear panel
6. SWGR generator feeder
7. Control transformer
8. Interlocking panel
9. Relay cum control panel
10. Electrical fan with motor
11. Load shedding cum-annunciator panel
12. Water preheater unit
13. Needle valve
14. Current transformer
15. Neutral grounding resistor panel
16. Corrugated pipe compensator
17. Maintenance water tank with HFO
18. Raw water MCC
19. HFO feeder system, fuel supply unit, nozzle temperature control unit, HFO transfer system unit
20. Flexible fastening equipment
21. Refractory bricks
22. SS flexible hose
23. MS plated wire guard
24. Monometer
In respect of all the above items, barring item No. 23, Id. Counsel has cited decisions holding the items to be capital goods eligible for Modvat credit under Rule 57Q. Most of these items were used as “accessories” to Diesel Generating sets in the captive power plant in the respondent’s factory. As the DG sets were covered by Clause (a) of Explanation I ibid, their “accessories” were covered by Clause (b) of the said Explanation. Thus, all the said items were eligible for capital goods credit. The appellant has prayed for a remand of the matter to the lower authority for fresh decision on the admissibility of Modvat credit on the above items of capital goods with reference to the tariff classification of the goods. During the period of dispute, the tariff classification of capital goods was not a factor determining the eligibility of the goods for Modvat credit under Rule 57Q. This factor was introduced in the rule only w.e.f. 23-7-96. As we have already pointed out, all the items of capital goods, barring Item No. 23 above, have already been held to be Modvatable capital goods in various cases cited by Id. Counsel. The only item, in respect of which no case law was cited is ‘MS plated wire guard’ vide Item No. 23 above. It appears from the records that this item was used as a spare for polymer lighting in the PVC plant of the respondents. Obviously, this item was also covered by Clause (b) of Explanation I to Rule 57Q(1). Thus in respect of all the 24 items listed above, the impugned order has to be sustained. Accordingly, Appeal No. E/141/99 is dismissed.
3. Appeal No. E/142/99 is against grant of capital goods credit on the following 5 items :-
(1) 11 kv – 250 mva outgoing panel
(2) 11 kv – 250 mva incoming panel
(3) Generator excitation transformer panel
(4) VCM bullet
(5) Mineral insulated rtd. Insert
Most of these items were used as “accessories” of DC. sets in the captive power plant in the respondents’ factory and, therefore, these items qualify to be eligible for capital goods credit in terms of Clause (b) of Explanation 1 ibid. In respect of Items 1, 2 and 3, Id. Counsel has cited decisions holding the goods to be eligible for Modvat credit under Rule 57Q. It appears from the records that Item No. 4 (VCM bullet) was used as container for transportation of input to the factory. Admittedly, the item was not used in the factory. Therefore, the benefit of Modvat credit would not be available for “VCM bullet” under Rule 57Q. The 5th item mentioned above was also used in captive power plant and the same was also covered by the definition of “capital goods” under Explanation I ibid. In the result, Appeal No. 142/99 is allowed only to the extent of denying capital goods credit in respect of ‘VCM bullet’. Appeal is dismissed as regards as all the other items of capital goods.
4. The challenge in Appeal No. E/143/99 is against grant of capital goods credit on the following 14 items :-
(1) Capacitor
(2) HH elecon switch
(3) Rheostat rating
(4) Thermotracers
(5) Cryoflex complex hose and HD chemiflex hose
(6) Mercury steel dial thermometer
(7) Moving iron AC panel meters
(8) Oil circuit breaker
(9) Digital DC calibrator
(10) Castable refractory
(11) Air setting mortor/castable refractory
(12) 3 phase kwh meter
(13) KWH meter
(14) Metallic bellow
In respect of all the items, barring Item Nos. 9 and 14, Id. Counsel has cited case law supporting the eligibility of the goods for Modvat credit under Rule 57Q. The items mentioned at SI. Nos. 9 and 14 were used as “accessory/spare” of capital goods covered by Clause (a) of Explanation I ibid and hence these items were eligible for credit in terms of Clause (b) of the said Explanation. We have also examined the use of all the other items and have found that all of them qualify for Modvat credit under Rule 57Q. In the result, Appeal No. 143/99 also stands dismissed.
(Operative part of the order was pronounced in open Court on 14-9-2005)