ORDER
Archana Wadhwa, Member (J)
1. Shri J.C. Patel, learned Advocate, argued on the following three issues.
(i) Whether the items used in the mines which are situated outside the appellants’ factory premises are eligible for modvat credit as capital goods;
(ii) Whether the cement and steel used for civil construction are entitled to modvat credit as capital goods; and
(iii) Whether welding electrodes used for repairing and remaking old worn out machine parts can be considered as capital goods in terms of the provisions of Rule 57Q.
2. We have heard both the sides.
3. As regards the first issue as to whether the capital goods used in the mines situated outside the factory premises, the appellants have contended that minies are owned by them and is an extension of their cement manufacturing factory. The same would be includable in the definition of “factory” inasmuch as mining was an inevitable and necessary compliment to the cement industry. For the above proposition, they have relied upon the Tribunal’s decision in the case of Finolex Industries Ltd. v. CCE, Pune-II being Order No. C-II/1115-24/WZB/2003 dated 22.5.2003 wherein the Tribunal has held that the jetty, which was adjacent to the factory premises and was owned by the factory owners, was covered by the definition of “factory” under the provisions of Section 2(e), being a precinct thereof and as such, the parts of the moving arm being used on the said jetty would be eligible for the purpose of modvat credit as capital goods.
However we find that apart from the fact that the ratio of the above decision is not applicable to the facts and circumstances of the case, the larger bench of the Tribunal in the case of Madras Cement Ltd. v. CCE, Hyderabad reported as 2003 (56) RLT 978 (CEGAT-LB), by relying upon the Supreme Court’s decision in the case of J.K. Udaipur Udyog Ltd. , has held that the capital goods used in the mines situated outside the factory premises are not eligible for the purposes of modvat credit in terms of Rule 57Q of the Central Excise Rules. Inasmuch as the issue is decided by the larger bench, we find no reasons to take a different view and accordingly by following the ratio of the same reject the appellants’ claim for modvat credit in respect of the capital goods used in the mines.
4. As regards the denial of credit in respect of cement and steel used in civil construction in the appellants’ factory, we find that the appellants’ reply filed before the adjudicating authority has not disputed the Revenue’s stand for denial of credit in respect of the said items and voluntarily debited the credit so taken. From the reply we do not find that any defence argument in respect of the said items was placed on record. Accordingly the Commissioner while holding that the cement and steel was used for the purposes of civil construction or was consumed during the building of such civil structures has held that the same cannot be considered as capital goods used in or in relation to the manufacture of the appellants’ final product. However, we find that the appellants have now contended before us that such use of cement was for erection of the foundation on which the plant and machinery was installed. The learned Advocate has relied upon the Tribunal’s decision in the case of Lloyds Steel Inds. Ltd. v. CCE, Nagpur being Order No. C-II/1384-90/WZB/2003 dated 13.6.2003 wherein the cement used in the foundation of the plant and machinery was held to be an admissible capital goods for the purposes of modvat credit. As already observed, the appellants nowhere before the authority below contended that such cement was used for erection of the foundation of plant and machinery. On the contrary, they accepted the allegations made in the show cause notice that the said cement and steel was used for civil construction in the appellants’ factory and voluntarily debited the amount. In this view of the matter, we do not find any infirmity in the view taken by the adjudicating authority and reject the appellants’ contention that such cement would be entitled to modvat credit.
5. The learned Advocate submits that while disallowing the modvat credit in respect of cement, iron and steel used for civil construction/structures, the adjudicating authority has also disallowed the credit in respect of pipes by treating the same as having been used in the civil construction whereas the fact is that such pipes, tubes etc. were used for supplying water and air to the various machinery and equipment through the pipelines and were used for venting of process system and material conveying system in cement plant. The MS pipes are also used to vent out the dust laden in dust collector system and then the dust is fed back to the system through the pipeline. We find that there is no discussion on the above point by the adjudicating authority, for which purposes we direct him to re-adjudicate the issue.
6. As regards the welding electrodes, we find that the Tribunal in the case of Malhar Cement v. CCE, Raipur vide its Final Order No. A/1192/02 dated 24.12.2002, has observed that the welding electrodes used for repairing the remaking of worn out parts would be eligible capital goods for the purposes of modvat. The above view has been taken by following the larger bench decision of the Tribunal in the case of Modi Rubber Ltd. 2000 (119) ELT 197. As such, following the ratio of the above decision, we are of the view that welding electrodes would earn modvat credit as capital goods.
7. As regards the penalty of Rs. 2 lakhs, the appellants have contended that the entire credit was taken on the basis of documents and the same relates to bona fide dispute about the eligibility or otherwise of the credit. Accordingly they have prayed for setting aside the penalty. We agree with the above contention of the appellants. There is nothing on record to reflect any mala fide on the part of the appellants so as to invoke the penal provisions against them. Accordingly we set aside the personal penalty imposed on them.
8. The appeal is disposed of on the above terms.