ORDER
V.K. Ashtana, Member (T)
1. This is an appeal against the Order-in-Appeal No. 209/98-(Mdu), dated 30-11-1998 passed by the Commissioner (Appeals), wherein the Order-in-Original No. 12/97, dated 3-2-1997 passed by the Assistant Commissioner of Central Excise has been upheld relying on the decision of the Southern Regional Bench of the Tribunal in the case of Shanmugaraja Spinning Mills Pvt. Ltd. as reported in 1997 (98) E.L.T. 84 (T) wherein it has been held that humidifcation unit (and therefore parts thereof) cannot be considered as capital goods under Rule 57Q. The order impugned also holds that Notification No. 14/96-C.E. (N.T.) would be effected only from its date and not retrospectively.
2. Heard Sri S.S. Thakur, Vice-President (Excise) for the appellants and Sri S. Sankaravadivelu, learned JDR.
3. Sri Thakur submits that even the case law relied upon by the department in the Order-in-Appeal namely Shanmugaraja Spinning Mills Pvt. Ltd. (supra) is in their favour. He submits that the decision concerned Notification No. 11/97-C.E. (N.T.) in which the humidification plant was subsequently included in the category of capital goods only from 16-3-1995. The said decision cannot be applied to the facts of this case, inasmuch as that here the credit on parts of humidification plant was taken on 28-6-1996 and 10-7-1996 i.e. much after the issue of notification by the Government subsequently which allows humidification plant to be capital goods. Therefore, the case law relied upon by the department stands distinguished on facts. He further submits that even otherwise, the Tribunal in the case of C.C.E. v. Malnad Alloy Castings Pvt. Ltd. as reported in 1999 (108) E.L.T. 181 has held that the said notification amending the Explanation to Rule 57Q is a clarificatory one.
4. The learned DR on the other hand, submits that in the case of C.C.E. v. Fourts (India) Laboratories Pvt. Ltd. as reported in 1997 (92) E.L.T. 231 (T) it has been held that air-conditioners used to control the temperature and humidity during the manufacture of medicines was not eligible for Modvat credit under Rule 57Q. He also cites the decision of the Tribunal in the case of Titan Industries as reported in 1997 (96) E.L.T. 398 (T), wherein air-conditioners were similarly held not eligible for Modvat as capital goods.
5. I have carefully considered the rival submissions and case laws cited, I find that the case laws cited by the revenue stand distinguished to the facts of this case due to the following reasons :-
(a) case-laws with respect to use of air-conditioners for maintaining required environment of temperature and humidification are different from the facts of this case as the items involved here are parts of humidification plant and not air-conditioner or refrigeration equipment and humidification plant cannot control the temperature.
(b) As far as reliance in the case of Shanmugaraja Spinning Mills cited supra is concerned, I find that it considered a situation where the humidification plant etc. was received and credit taken prior to the issue of Notification No. 11/95, dated 16-3-1995, whereas in the present case, it is not disputed that the goods were received and credit taken on 28-6-1996 and 10-7-1996.
Therefore, I find that the issue is to be decided on its own merits. I find that it is a common knolwedge that manufacture of yarn by employing high speed frames requires higher humidity to be maintained in the ring frame section of the spinning unit, without which the yarn is liable to break often. Therefore, in this case the maintenance of required level of humidity has clear nexus to manufacturing process. This nexus is actually an essential required environment. There is nothing optional in it. I therefore, find that on the merits of the case, since the humidification plant (and therefore its parts to maintain it) are an essential equipment of capital goods required for the manufacture of finer count yarns, (higher count yarns), therefore, they would be eligible as capital goods under Rule 57Q. I, therefore, find great merit in this appeal and allow the same with consequential relief, if any, as per law.