ORDER
K.K. Usha, J. (President)
1. This is an appeal at the instance of the assessee challenging the order passed by the Commissioner of Central Excise (Appeals) dated 2.11.1998.
2. The appellants are manufacturers of refractory bricks and refractory mortar falling under Chapter sub-heading 6901.00 and 3816.00 of the CETA 1985. The issue arising in this appeal is whether the Escorts JCB 530 Loadall used by the assessee in its factory falling under Heading 84.29 is eligible to modvat credit under Rule 57Q. The assessing authority as well as Commissioner (Appeals) rejected the claim put forward by the assessee for modvat credit under Rule 57Q. Aggrieved by the above, the assessee has come up in appeal.
3. According to the assessee Loadall is an item of machinery/equipment coming under the definition of capital goods. The assessee would contend that Loadall is operated on Hydraulic System, and used for handling material in bulk. Bauxite which is raw material used in the appellants’ factory is lifted with Loadall from the place of storage and is dumped on to the hopper. Reliance was placed by the assessee on the decision of the Apex Court in CCE v. Rajasthan State Chemical Works to contend that the process of handling, lifting, transfer, transportation of raw materials which the factory is also a process in or in relation to manufacture integrally connected with further operation leading to manufacture of goods. The Commissioner (Appeals) took the view that since Loadall is used for carrying raw material from the place of storage for dumping on the hopper, it cannot be said that the same is used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product for the purposes of Rule 57Q. It was held that by an exemption Notification No. 14/96-CE(NT) dated 23.7.1996, Heading 84.29 in which Loadall falls, was specifically excluded from the definition of capital goods. This amendment has to be treated as clarificatory in nature and should be made applicable to the earlier period also. For this reason, the plea put forward by the assessee was rejected by the Commissioner (Appeals). It is contended before us by the appellants that the Commissioner (Appeals) has committed an error in applying the amended rule brought into effect on 23.7.1996. It is submitted that by the above amendment capital goods falling under certain Chapters were enumerated. Before 23.7.1996 Clauses (1)(a) of the Explanation covered machinery, plant, equipment, apparatus etc. with specified heading number. Therefore, for the relevant period concerned the unamended provision should have been applied in the light of the decision relied on by the appellants.
4. We find merit in this contention raised on behalf of the appellants. In CCE v. Rajsthan State Chemical Works the Supreme Court took the view that the transfer of raw material to the reacting vessel is a preliminary operation which is part of a continuous process but for which the manufacture would be impossible. The handling of the raw material for the purpose of such transfer is then integrally connected with the process of manufacture. In CCE, Meerut v. Uttam Industrial Engineering Pvt. Ltd. the Tribunal took the view that electrical overhead travelling cranes used for moving parts of machinery inside the production hall are eligible for modvat under Rule 57Q. Merely because such cranes falling under 84.26 were specifically brought under the purview of the definition of machinery under Rule 57-Q with effect from 16.3.1995 would not mean that for the earlier period modvat credit was not admissible. Such cranes performed functions referred in the definition of capital goods in the said Rule even as it stood prior to the amendment. In CCB, Meerut v. Mansurpur Sugar Mills Ltd. , the Tribunal took the view that cane unloader is liable to be treated as capital goods within the meaning of Rule 57Q. The process of manufacture of sugar is an integral and continuous process commencing from unloading cane and ending with manufacture of sugar. Commissioner of Central Excise, Jaipur v. R.K. Marbles Ltd. is yet another decision of the Tribunal where a similar issue was considered. It was held that gantry crane and trolley used for transfer of raw materials for sawing are integrally connected with process of manufacture of marbles and therefore, modvat credit is admissible under Rule 57Q.
5. We are of the view that the Commissioner (Appeals) has erred in applying the amended provisions of the Explanation to the facts of the case. Since the amendment is not retrospective, the appellants case has to be decided on the basis of the rule, as it stood during the relevant period. By applying such provision, the appellants are entitled to modvat credit in respect of Loadall in the light of the dictum laid down by the Apex Court in Rajasthan State Chemical Works. The decisions of this Tribunal referred above are also in support of the claim put forward by the assessee. We, therefore, set aside the order impugned and allow the appeal.
Operative part of the order already pronounced in the open Court.