ORDER
V.K. Agrawal, Member (T)
1. The issue involved in this appeal filed by M/s. Rajasthan Spg. & Wvg. Mills Ltd. is whether capital goods credit is available under Rule 57Q of the Central Excise Rules in respect of (i) Frequency Converter, (ii) Motor Protection Switch and (iii) ACB 2500 Amp.
2. Briefly stated the facts are that the Assistant Commissioner under order dated 29-11-1996, disallowed the capital goods credit to the appellants, holding that frequency converter was used for converting A.C. into D.C. or less frequencies and vice versa; that Motor protection switches were used for switching the electrical apparatus and ACB was used for protecting the electrical circuit; that these goods had no role to play directly or indirectly in the manufacture of the final product. On appeal, the Commissioner (Appeals) also confirmed the adjudication order in respect of these goods on the ground that these goods were received in November – December, 1995, that is, prior to the issuance of Notification No. 14/96 (N.T.), dated 23-7-1996.
3. Shri Jitendra Singh, learned Advocate, submitted that the issue regarding the eligibility of goods to capital goods credit has been resolved finally by the Larger Bench of the Tribunal in the case of Jawahar Mills Ltd. v. C.C.E., Coimbatore, 1999 (108) E.L.T. 47 (T); that as per this decision the capital goods credit is admissible on all these items. Shri Y.R. Kilania, learned DR, reiterated the findings of both the lower authorities.
4. I have considered the submissions of both the sides. The Larger Bench of the Tribunal in Jawahar Mills case, supra, considered the scope of capital goods eligible for capital goods credit under Rule 57Q of the Central Excise Rules. The Tribunal after referring to the Supreme Court’s decision in C.C.E. v. Indian Farmers Fertilizer Coop. Ltd., 1996 (86) E.L.T. 177 (S.C.), J.K. Cotton Spg. and Wvg. Mills Co. Ltd. v. STO, 1997 (91) E.L.T. 34 (S.C.) and Gujarat High Court’s decision in Industrial Machinery Manufacturing (P) Ltd., held that “it will not be possible and correct to construe the expression ‘used for producing of any goods for the manufacture of the final product’ as synonymous with ‘used for bringing about any change in any substance for the manufacture of the final product’. The said expression would not, to use the language of the Supreme Court in J.K. Cotton Spg. & Wvg. Mills Co. Pvt. Ltd., be limited to ingredients or commodities used in the process or those directly and actually needed for turning out or the creation of the goods.” The Larger Bench further held that “the issue as to whether the amendment effected in Notification No. 11/95, dated 16-5-1995 under Rule 57Q and Notification No. 14/96-C.E., dated 23-7-1996 is retrospective, becomes academic. We have to decide the matter according to the language of the provision as it stood at the material time. We are required to examine Explanation l(a) as it stood in 1994-95 and 1995-96 and we, therefore, see force in the contention of the assessee that the items which are recognised as eligible to capital goods credit by Notification 14/96 are items covered by Explanation l(a) and it cannot be contended by the Revenue that these items are not covered by the Headings mentioned in Notification 14/96 or that the items are not capital goods within the meaning of Explanation l(a) under Rule 57Q as it stood during the relevant period.
5. Following the ratio of this decision, the capital goods credit is available to the appellants in respect of Frequency converter and Motor protection switches as these are necessary goods for the appellants to carry on production. I observe that the function performed by ACB 2500 Amp has not been brought on record clearly as it is only mentioned that it was used for protecting the electrical circuit. It is, therefore, necessary to remand the matter to the Assistant Commissioner to verify the use of ACB 25000 Amp and, applying the ratio of the decision of the Larger Bench in Jawahar Mills Ltd. case, decide its eligibility to the capital goods credit under Rule 57Q of the Central Excise Rule. In view of these facts and circumstances the penalty of Rs. 1000/- imposed on the appellants is also set aside.
6. The appeal is disposed of in above terms.