ORDER
U.L. Bhat, President
1. These appeals are filed by the department and the assessee respectively, challenging parts of the Order-in-Appeal No. 405/96, dated 12-6-1996 passed by the Commissioner of Central Excise (Appeals) partially modifying the order-in-original dated 20-10-1995 passed by the Asstt. Commissioner of Central Excise, Hosur.
2. We have heard both the sides.
3. The appellant, engaged in the manufacture of Steel Ingots, was availing credit under Rule 57Q of the Central Excise Rules, 1944 in respect of various items claimed as inputs. The Show Cause Notice was issued stating that the some of the items in respect of which credit was taken are not eligible for credit under Rule 57Q and proposing demand in respect thereof. Though the appellant resisted the notice, the Asstt. Commissioner disallowed the credit in respect of Oxygen Lancing Pipe, Tor Steel, M.S. Rounds, M.S. Angles, C.I. Trumphet and Capacitors. In appeal, the Commissioner (Appeals), allowed the credit in respect of C.I. Trumphet and Capacitors and confirmed the rejection in respect of other 4 items. The assessee as well as the department are aggrieved.
4. The Oxygen Lancing Pipe is used to connect the Oxygen tank to the furnace in which the Iron scrap, the basic raw material, is melted. Without connecting the pipe, Oxygen cannot reach the furnace. Oxygen helps in the process of burning and oxidation.
5. Our attention is invited to the Bombay Collectorate Trade Notice No. 41/89, dated 19-4-1989 clarifying that Lancing Pipe, though part of the machinery, would not be entitled to Modvat credit under Rule 57A of the Rules. It is the contention of the department that the pipe is part of the building. We are not able to agree. It is not denied that the pipe takes the Oxygen from the Oxygen Tank to the furnace. If that be so, the pipe must be regarded as part of the apparatus or plant itself. Under Rule 57Q of the Rules credit as specified duty on capital goods used by the manufacturer in his factory is allowed and the same can be utilised towards payment of Excise Duty on the final product or as the case may be, on the capital goods. The expression “Capital goods” has been defined as ‘machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products, as also components, spare parts and accessories of the aforesaid machines etc., and moulds and dies, generating sets and weighbridges used in the factory of the manufacturer. This was the definition as it stood at the relevant time.
6. Oxygen Tank and the Furnace can certainly be regarded as part of the plant. That being so, the Oxygen Lancing Pipe must be regarded as component of such plant, and has to be regarded as “capital goods” for the purpose of the rule. The assessee would be entitled to the benefit of the rules in regard to duty paid on Lancing Pipe.
7. Similar is the position with regard to C.I. Trumphet and Capacitors. The C.I. Trumphets are used to pour molten metal into the mould. Capacitors are used in Power Factory Equipment for regulating voltage on flow of power to the machines or other equipments. These have to be regarded as component parts of the Plant, manufacturing steel ingots and are eligible to the benefit of Rule 57Q of the Rules.
8. Tor Steel, M.S. Rounds and M.S. Angles were not used directly in any machine or machinery or equipment or the like but were used in the construction of building for housing furnaces in the course of expansion of the factory of the assessee. The Lower authorities have held that these items cannot be regarded as components of capital goods and therefore would be outside the scope of the Rule 57Q of the Rules.
9. The ld. Counsel appearing before us for the assessee invited our attention to the decision of the Division Bench of the High Court of Madras in the case Madras Cements Limited reported in [110] ITR 281. That was the case of claim of depreciation in respect of capital goods under the provisions of the Income Tax Act, 1961. The dispute related to specially reinforced foundation constructed by the assessee on which the kiln was set up. The department took the view that the special foundation was a part of the building. The Income Tax Tribunal took a contrary view holding that the foundation forms part of the Plant and therefore must be treated as capital goods. This matter reached the High Court by way of reference.
10. The expression “Plant” is defined in Section 43(3) of the Income Tax Act as “including vehicles, books, scientific apparatus and surgical equipment used in the business of profession”. Since this is an inclusive definition it was regarded that the expression ‘plant’ would comprehend its ordinary meaning also. The expression ‘Plant’ has been defined in Webster’s Third New International Dictionary as “Land, Building, machinery, apparatus and fixtures employed in carrying on trade or other business”. The High Court took the view that since books also have been included in the meaning of Plant, it is clear that the Legislature intended to give a wide meaning to the above expression ‘Plant’. In that view, the finding of the Tribunal was held to be correct.
11. In the course of the order, the High Court has referred to a decision of the Supreme Court and other decisions. The Supreme Court in the case of Taj Mahal Hotel – 1971 (82) ITR 44 (SC) referred to the wider meaning of the expression ‘Plant’ in the Webster’s Dictionary and held that the ‘Plant’ comprehends buildings employed in carrying on trade or other industrial business and therefore the sanitary and pipeline fittings of Hotel would fall within the expression ‘plant’. The other decisions referred to do not relate to any building.
12. According to the ld. Counsel, going by the wide meaning as ascribed to the expression “Plant” in the decisions under the provisions of the Indian Income Tax Act, the expression “Plant” used in Explanation l(a) to Rule 57Q of the C.E. Rules also should be ascribed wider meaning and in that view the expression “Plant” must include buildings in which M.S. Rounds, M.S. Angles have been used. This contention is rebutted by the departmental representative who contended that in the absence of definition of the expression “Plant” under the rules and the context in which the definition ‘capital goods’ occurs and on consideration of the definition, the expression cannot be ascribed wider meaning as in the Income Tax Act.
13. For the purpose of Income Tax Act, capital goods include appliances used for the purpose of trade or business. The definition of “capital goods” in the explanation to Rule 57Q of the Rules follows quite a different scheme. The sub-rule itself referred to capital goods used by the Manufacturer in his factory. Explanation 1(a) refers to Machines, Machinery, Plant, Equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. Considering the scheme of Rule 57Q, the definition in Explanation 1(a) of capital goods, as meaning machines, equipments, apparatus, tools, appliances used for producing or processing the goods etc., clearly indicate the intention of the rule making authority to give the wider meaning to the expression ‘plant’ but to give a narrower meaning which is suitable in the context. “Plant”, therefore, could be regarded as machine or group of machines fitted in such a manner as to serve the purpose of manufacturing any particular product, and the whole system of machine has to be regarded as Plant.
14. In this view, we are unable to agree that building in which the furnace is housed should be regarded as a Plant and therefore as capital goods to entitle components of such building to fall under the definition of “capital goods”. In our opinion these three articles do not fall within the ambit of Rule 57Q of the rules.
15. In the result, we modify the order passed by the Commissioner (Appeals) by holding that credit under Rule 57Q of the rules is admissible in respect of the input Oxygen Lancing Pipe. We confirm the order in other aspects. The appeal filed by the assessee is allowed in part and the appeal filed by the department is dismissed. The cross-objections filed by the assessee in the appeal of the department being merely supportive is dismissed.