ORDER
V.K. Ashtana, Member (T)
1. This is an appeal against Order-in-Appeal No. 334/96 (M), dated 14-10-1997 wherein Modvat credit under capital goods scheme was held ineligible to TOR Steel, Cement and Nickel Plates. To this extent, the Order-in-Original No. 61/96, dated 9-4-1996 was upheld. The total duty involved is as follows :-
Tor Steel - 2,85,115.00
Cement - 69,700.00
Nickel Plates - 1.59.804.00
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TOTAL - 5.14.619.00
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The appeal is limited to contesting the impugned order for Nickel Plates, Cement & Tor Steel only as well as imposition of penalty.
2. Heard Shri Hussainy for appellants and Shri S. Kannan, ld. JDR.
3. Shri Hussainy submitted as follows :-
(i) Nickel Plates are spare parts of Caustic Soda concentrator & Caustic Soda Flaker Drums. The former increases concentration of Caustic Soda Lye and the latter makes caustic soda flakes. Both caustic soda lye/flake are their declared final products. Since these equipment are clearly capital goods, parts thereof (Nickel Plates) would also qualify for Modvat credit. As against this the impugned order gives no detailed reasons as to why they are not directly concerned in manufacture of the final product(s).
(ii) With respect to Tor Steel & Cement, he submitted that there is no definition of ‘Plant’ in definition of capital goods. Therefore, he relied on definition of plant by Hon’ble Delhi High Court as in case of R.C. Chemical Industries as reported in 1982 ITR Vol. 134 Page 330 and submitted that as the building is used for manufacture of goods inside it, so it would be covered by ‘Plant’. Tor Steel & Cement being used for the building would be so used for the Plant and hence eligible for Modvat credit.
4. Learned JDR reiterates Order-in-Appeal for Nickel Plates, but strongly opposes for Cement & Tor Steel. He cited 1998 (97) E.L.T. 530 (Tribunal) (Malvika Steel) wherein it was held that Cement & Steel structure used in erection of blast furnace is building material and not eligible for credit as Capital Goods. He also cited case of Indo Rama Synthetics as reported in 1996 (86) E.L.T. 277 (Tribunal) where cement and steel structural were similarly prima facie not eligible. He further cited case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. as reported in 1997 (91) E.L.T. 34 (S.C.) wherein it was held that building materials used for construction of ‘plant’ cannot be said to be used as ‘plant’ in manufacture of goods.
5. Sri Hussainy countered that in case of Indo Rama, use is for foundation and not for building, hence facts are distinguishable. Also case of J.K. Cotton (supra) was under Sales Tax Law and so distinguishable.
6. I have carefully considered the arguments on both sides. We find that since there is no definition of ‘plant’ under Modvat Scheme, we have to go by the common-sense and trade meaning. Cement and Tor Steel are clearly recognised as building materials. The Tribunal has already held in Indo Rama Synthetics and Mahindra Steels (supra) that they are so and that therefore they are not eligible for credit as capital goods. Merely because they were used for foundation of blast furnace, they do not cease to be building materials. Therefore, the issue is no longer res Integra and the ratio of these two decisions are liable to be applied in this Case also as it is not disputed that both cement and Tor Steel are used for building. Respectfully applying this ratio, I do not find any infirmity in the order impugned and hold that cement and Tor steel are not eligible for Modvat credit under Rule 57Q.
7. As far as Nickel plates are concerned, I am unable to agree with the revenue’s reasoning that concentrator is merely filtering and flaker is also not directly used in the manufacture of final products. The role of concentrator is to concentrate the Lye, without which process, flakes cannot be produced therefrom. Similarly, the final product caustic soda flakes are produced in the flaker unit. Therefore, both machines are integral to the manufacturing process. The plates are spares replacement components of these machines and are accordingly eligible for credit under Rule 57Q. In view of this, the penalty in Appeal No. 846/98 of Rs. 8000/- is reduced to Rs. 4,000/- (Rupees Four Thousand only). The orders impugned accordingly modified to this extent and the appeal partially succeeds as per above orders with consequential relief, if any, as per law.