2004 (97) ECC 229 (Tri)

CUSTOMS, EXCISE & GOLD (CONTROL) APPELLATE TRIBUNAL

West Regional Bench -- Mumbai

Ms. Jyoti Balasundaram, Member (J) & Shri Moheb Ali M., Member (T)

Reliance Industries Ltd.

Versus

CCE, Surat-I

Appeals No. E/3895 to 3909/1998-Bom

[Arising out of Order-in-Appeal RJB/108/SRT-I/98 dt. 31.7.1998, RJB/117/SRT-I/98 dt. 18.8.1998, RJB/119-121/SRT-I/98 dt. 20.8.1998, RJB/126/SRT-I/98 dt. 20.8.1998, RJB/116/SRT-I/98 dt. 10.8.1998, RJB/112/SRT-I/98 dt. 10.8.1998, RJB/118/SRT-I/98 dated 20.8.1998, RJB/115/SRT-I/98 dt. 10.8.1998, RJB/113/SRT-I/98 dated 10.8.1998, RJB/124-125/SRT-I/98 dated 20.8.1998, RJB/121-123/SRT-I/98 dated 20.8.1998, RJB/110/SRT-I/98 dated 31.7.1998 passed by CCE (Appeals), Mumbai VII, Surat I & II.]

Order No. A/751 to 765/WZB/2004/C-I, dated 15.4.04, Certified on 4.6.04

Modvat credit

Capital goods -- Components, spares and accessories of goods & moulds and dies, pollution control equipments with each usability of the goods while manufacturing final product is explained and denied under each product i.e. (i) Nuts, bolts etc. is capital goods, (ii) Natural groundings registered, earthing wire etc. are capital goods, (iii) Molecular sieves -- is capital goods, (iv) ICTS for transformer etc. (Yes) (v) weigh bridge etc. (yes) (vi) Gas turbine parts (yes) (vii) Lighting fittings and parts (yes) (viii) Switch sockets and spares (yes) (ix) Boiler components (yes) (x) Disturbance recorder (yes) (xi) Flame proof equipments (yes) (xii) S.S. Powder (yes) (xiii) Hydraulic pallet Truck/Spring Hangers & Supports (yes) (xiv) Catalyst support spring (yes) (xv) Tract Ball assembly (yes) (xvi) connectors AEC-02R-20-455QC (yes) (xvii) Industrial Air Screw Fan Type AS. (yes) (xviii) Spares for Heater Plant, Studs with Buts (yes) (xix) Pneumatic Impact Wrench (yes) (xx) Switch Board, Switch bracket (yes) (xxi) Intrinsic Safety barrier (yes) (xxii) Tube closure rassemblies & enclosures (yes) (xxiii) Spares of microjet printer (yes) (xxiv) Spare parts for industrial sewing machine (yes) (xxvi) Glass cloth electrical insulator (yes) (xxvii) Element with fibre glass etc. (yes) (xxviii) Spare part for combustible gas indicator (yes) (xxix) FLP Plug (yes) (xxx) Bus Ducts & Accessories (Raw & Fire Water) (yes) (xxxi) Braided gland packing (yes) -- Appeal allowed as if an article was not covered under Rule 57Q, it was fully covered under Rule 57A of CER.

Appeal allowed

PRESENT :

Shri V. Sridharan, Adv. for the appellant.

Shri Ajay Saxena, SDR for the respondent.

Cases Cited :

1. Aditya Cement v. CCE, 2003 (89) ECC 650...................................................... [Para 2]

2. CCE v. Cosmo Ferrites Ltd., 2002 (148) ELT 1232............................................ [Para 2]

3. CCE v. Flex Chemicals 2002 (147) ELT 508

4. CCE v. Modi Rubber, 2000 (70) ECC 444 (LB).................................................. [Para 2]

5. CCE v. Surya Roshini, 2001 (128) ELT 293 (Tri-LB).......................................... [Para 2]

6. CCE v. Trichy Distilleries & Chemicals Ltd., 2002 (102) ECR 75 (T)................... [Para 2]

7. CCE v. Vikram Cement 2001 (132) ELT 662 (Tri).............................................. [Para 2]

8. CCE v.Bhar Caustic & Chemicals Ltd., 2000 (118) ELT 196.............................. [Para 2]

9. Devyani Beverages Limited v. CCE, 1999 (113) ELT 503................................... [Para 2]

10. Grasim Industries Ltd. v. CCE, 2004 (164) ELT 348 (Tri.)................................ [Para 2]

11. Jawahar Mills v. CCE, 1998 (108) ELT 47 (Tri-LB)........................................... [Para 2]

12. Malabar Cement Ltd. v. CCE, 2002 (149) ELT 751 (Tri)................................... [Para 2]

13. Rajasthan Steel Chemicals Works, 1991 (31) ECC 459 (SC)........................... [Para 2]

14. Vindhya Telelinks Ltd. v. CCE, 2000 (116) ELT 528........................................ [Para 2]

Per : Ms. Jyoti Balasundaram

The aforesaid 15 appeals arise out of orders-in-appeal passed by the Commissioner of Central Excise (Appeals), Surat wherein the Commissioner (Appeals) has inter alia, disallowed modvat credit on various items listed in the chart enclosed as Annexure-1. The period involved in the aforesaid appeals is prior to 23.7.1996. The Explanation to Rule 57Q defining "Capial goods" during the period prior to 16.3.1995 reads as under:

"(1) `capital goods' means --

(a) 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 themanufacture of final products;

(b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and

(c) moulds and dies generating sets and weight bridges used in the factory of manufacturer;

(d) ........"

After 16.3.1995, capital goods, have been defined as:

"Explanation. -- For the purpose of this section, --

(1) "capital goods" means, following goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer, namely: --

(a) all goods falling under Chapter 84 (other than those falling under heading No. 84.07 to 84.09, Compressors falling underheading No. 84.14 and of a kind used in refrigerating and airconditioning appliances and machinery, heading or sub-heading Nos. 84.15, 84.18, 8422.10, 84.24, 84.29 to 84.37, 84.40, 84.50, 84.52, 84.69 to 84.74, 84.76, 84.78, expansion valves and solenoid valves falling under sub-heading No. 8481.10 of a kind used for refrigerating and airconditioning appliances and machinery);

(b) all goods falling under Chapter 85 (other than those falling under heading Nos. 85.09 to 85.13, 85.16 to 85.31, 85.39 and 85.40);

(c) all goods falling under heading No. 90.11 to 90.13, 90.16, 90.17, 90.22 (other than for medical use), 90.24 to 90.31 and 90.32 (other than of a kind used for refrigeration and airconditioning appliances and machinery);

(d) components, spares and accessories of the goods specified against items (a) to (c) above;

(e) moulds and dies;

(f) refractories and refractory materials;

(g) tubes and pipes of iron or steel or copper or Aluminium used for conveying inputs, on which credit of duty is taken, intermediates goods or final products in the factory; and

(h) pollution control equipment."

2. We have heard both sides. The item-wise findings of the Commissioner (Appeals) disallowing the modvat credit and our findings are as under:

I. Nuts, Bolts, Studs, Screw, Washer, Fasteners

I(a) The Commissioner (Appeals) has denied modvat credit on these items by observing as under:

"These are fasteners for assembling the various components and parts fitted at PTA/POY/Cracker plant to make the entire plant. Since these goods play no part in relation to manufacture of final goods, credit on them has been rightly rejected by the Assistant Commissioner."

I(b) Findings:

The Commissioner (Appeals) has not disputed the fact that the fasteners are for assembling the various components/parts fitted to make the entire plant. Therefore, these fasteners are part of the plant. Such plant is used for producing and processing of goods and therefore it is covered by the Explanation 1(a) to Rule 57Q. Therefore, parts of such plants are also covered as capital goods in terms of Explanation 1(b) to Rule 57Q. Nut Bolts are held to be eligible for capital goods credit in CCE v.Bhar Caustic & Chemicals Ltd., 2000 (118) ELT 196 and Vindhya Telelinks Ltd. v. CCE, 2000 (116) ELT 528.

II. Neutral Grounding Resistor, Earthing Wire, Earthing Cable, Strip for earthing, Earthing Trolley, Earthing Equipment

II(a) In respect of these items, the Commissioner (Appeals) had observed that these are used for protecting of devices and therefore they are ineligible for credit. At Page 288-289 of Appeal No. E/3900/98 & internal page no. 17 and 18 of the impugned Order-in-Appeal the Commissioner (Appeals) has dealt with earthing cable. The Commissioner (Appeals) in respect of these items has denied the modvat credit by observing as under:

"In regard to credit of earthing cables, the purpose is to protect the devices only. Thus, they are ineligible for credit."

"These goods are parts of the POY plant. Switch Board Panel are used for providing electrical connections in the plant for the effective working of the production process. Earthing cables are fitted to the plant and machinery to ensure that any power leaks are safely earthed whereby no damage is caused to the plant/equipment parts leading to their stoppage and resultant halt in production."

In respect of other items like neutral grounding resistors, earthing wire strip for earthing, earthing control, earthing equipment, the Commissioner had denied the credit on identical ground by oserving that these are to protect the devices only.

II(b) Findings:

All the aforesaid items are electrical items specifically covered by the decision of the Larger Bench of the CEGAT in the case of Jawahar Mills, 1998 (108) ELT 47 as upheld by the Hon'ble Supreme Court in the judgment reported at 2001 (132) ELT 3.

III. Molecular Sieves

III(a) The relevant portion of the Commissioner (Appeals) order denying the modvat credit on Molecular Sieves is as under:

"These are used at the POY plant

The adjudicating authority has denied credit on ground that Molecular Sieves perform the function of purifying air by removal of moisture.

Hence this is in the nature of `input' and therefore credit under Rule 57Q meant for capital goods cannot be granted for this item. I agree with this.

It is seen the appellants took credit for this item under Rule 57Q in view of the show cause notices issued by the range authorities for credit taken earlier for similar goods under Rule 57A. The first adjudication order granting modvat credit under Rule 57Q for molecular sieves was issued by the JAC in July 1996 vide Order-in-Original No. SRT-IV/Adj/82/96/MP dated 18.7.1996. Since the item has no role to pay in the manufacture of goods in the light of Supreme Court judgment in Rajasthan Steel Chemicals Works, 1991 (31) ECC 459 (SC) : 1991 (55) ELT 444 credit is not available to this item.

I also disagree with the appellants contention that if an article was not covered under Rule 57Q, it was fully covered under Rule 57A."

III(b) Findings

The Commissioner (Appeals) in fact agreed with the adjudicating authority that Molecular Sieves is in the nature of input. He has also accepted the factual position for the subsequent period and modvat credit has been extended to Molecular Sieves under Rule 57Q. When the Commissioner (Appeals) is accepting the position that Molecular Sieves is in the nature of input, the credit ought to have been granted under Rule 57A. Declaration filed in terms of Rule 57Q is sufficient for the purposes of extending the credit, under Rule 57A for Molecular Seives. This submission is fully supported by the decision of Larger Bench in CCE v. Modi Rubber, 2000 (70) ECC 444 (LB) : 2000 (119) ELT 197 and the decision of CEGAT in the case of Devyani Beverages Limited v. CCE, 1999 (113) ELT 503. Further, the Tribunal in the case of CCE v. Flex Chemicals 2002 (147) ELT 508 allowed modvat credit on Molecular Sieve as input though assessee claimed Molecular Sieves to be capital goods. The Tribunal followed the decision of Larger Bench in the case of Modi Rubber cited supra. In view of the above, the credit taken on Molecular Sieves is allowable.

IV ICTS for Transformer, Electrical Transformer, Transormer, Accessories for transformers, Distribution Transformer

IV(a) The finding of the Commissioner (Appeals) denying the modvat credit is as under:

"This is an essential part of the POY plant. It performs the function of distributing power to different sections of the POY plant for effective working of the production process. These goods have been specifically remjoved from the list of capital goods. They are therefore not eligible for credit. The judgments relied upon are irrelevant."

IV(b) Findings

The only ground given by the Commissioner (Appeals) to deny the modvat credit on transformer is that only, transformers of power handling capacity exceeding 75 kVA as specified in clause d(vi) of Explanation I to Rule 57Q is eligible for credit. Thus, according to the Commissioner (Appeals) only the items specified in clause (d) and used in the factory of manufacture are covered by the definition of `capital goods'. This interpretation of the Commissioner (Appeals) is incorrect since if the item is otherwise covered by clause (a) or clause (b) or clause (c) of Explanation to Rule 57Q then even if they are not specifically mentioned in clause (d) the said items are covered by the definition of `capital goods' and eligible for credit The item specified under clause (d) are merely to be used in the factory of manufacturer, Such items need not be used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. However, if the item is not covered by clause (d) specifically but is a machine, machinery, plant, equipment, etc. used for producing or processing of any goods or for bringing about any change in substance for the manufacture of final products, such item is covered by clause (a) of Explanation I to Rule 57Q. The aforesaid reasoning is fully supported by the following decisions: (a) Jawahar Mills v. CCE, 1998 (108) ELT 47 (Tri-LB) upheld by the Hon'ble Supreme Court in the judgment reported at 2001 (132) ELT 3 (SC); (b) CCE v. Surya Roshini, 2001 (128) ELT 293 (Tri-LB).

V. Weigh Bridge, Weigh Bridge structure, Platform Monitor

V(a) The finding of the Commissioner (Appeals) denying the modvat credit is as under:

"Weigh bridges are fitted & used at Cracker plant. Under clause (c) of the definition as was existing at the material period weigh bridges used in the factory of the manufacturer are eligible for credit. However credit is claimed on Weigh Bridge structure which is not permissible."

V(b) Findings:

The Commissioner (Appeals) has denied the credit of weigh bridge structure on the ground that part of weigh bridge are not covered by the definition of `capital goods'. This findings of the Commissioner (Appeals) is incorrect in law. The Hon'ble High Court of Madras in the case of Trichy Distilleries & Chemicals Ltd. vide judgment dated 29.1.2000 allowed the modvat credit on the parts of diesel generating sets. The Hon'ble High Court held that the diesel generating sets are covered by clause (c) of Explanation 1 to Rule 57Q and parts will also be covered under clause (c). The judgment of the Madras High Court has been extracted fully in the decision of the Tribunal in the case of CCE v. Trichy Distilleries & Chemicals Ltd., 2002 (102) ECR 75 (Tri.). The Tribunal in the following decisions had taken similar view by allowing modvat credit on parts of power plant/diesel generating set; (a) Grasim Industries Ltd. v. CCE, 2004 (164) ELT 348 (Tri.); (b) Aditya Cement v. CCE, Final Order No. A/600/03 NBC dated 22.10.2003 [reported in 2003 (89) ECC 650]. In view of the aforesaid decisions, the part of item covered by clause (c) to Explanation 1 to Rule 57Q are also covered by the definition of `capital goods'. Hence, the weigh bridge structure, platform monitor, etc. are eligible items under modvat as `capital goods'.

VI Gas Turbine Parts

VI(a) The finding of the Commissioner (Appeals) denying the modvat credit is as under:

"The declared capital goods are the essential part of the Gas Turbine. Gas Turbine is the essential machinery of the Captive Power Plant for power generation which is used in the production process during manufacture of various final products in the complex.

These are maintenance equipments of Gas Turbine and not the parts of the Gas Turbine, so credit has been rightly denied".

VI(b) Findings

The reasons made for allowing credit in respect of item No. V above are equally applicable for part of Gas Turbine parts.

VII Lighting fittings and parts, MV/SV chokes, Bulbs T.H.

VII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These are fitted in the plants for providing essential lighting in the working area whereby visual inspection and effective monitoring of the plants working by the plant personal can be performed round the clock. Though these are essential in the factory, they are not covered by clause (b) of definition of capital goods and thus not eligible for credit."

VII(b) Findings

Thus it is a finding of the fact by the Commissioner (Appeals) that these items are fitted in the plant are essential items in the work area. Therefore these are covered by the definition of `capital goods'. The findings of the Commissioner (Appeals) that these are not eligible for modvat credit is contrary to the decision of the Larger Bench in the case of Jawahar Mills v. CCE, 1998 (108) ELT 47 (Tri-LB) upheld by the Hon'ble Supreme Court in the judgment reported at 2001 (132) ELT 3 (SC).

VIII Switch Socket & Spares, Front Socket, ELP/WPS

VIII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These are the essential electrical parts used in the spinning area in the POY plant performing the function of connecting a motor to the power injuction box for supplying the electric currents to these motors. They are not eligible for credit."

VIII(b) These electrical parts are admittedly used in the spinning area of POY plant. Therefore, these are part of the plant covered by the definition of `capital goods'; in terms of explanation 1(b) to Rule 57Q. In view of the decision of the Larger Bench in the case of Jawahar Mills v. CCE, 1998 (108) ELT 47 (Tri-LB) as upheld by the Hon'ble Supreme Court in the judgment reported at 2001 (132) ELT 3 (SC) the credit on these elctrical parts is allowable.

IX Boiler component, Board Wall, Box Column, Plate, etc.

IX(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These are parts of Captive Power Plant's Boiler which is essential for Exothermic process during generation of electricity. These parts (w/beam/smb, plate) etc. are nothing but structural parts. Therefore credit has been rightly denied.

IX(b) Findings

It is an undisputed fact that these items are parts of captive power plant boiler. Once it is accepted that boiler is essential for Exothermic process during the generation of electricity and that the boiler is covered by the definition of `capital goods' under Explanation 1 (a) to Rule 57Q, the parts of such boilers are covered by Explanation 1(b) to Rule 57Q.

X Disturbance Recorder

X(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"This is an apparatus used in the Captive Power Plant for performing the function of recording the fluctuations occurring in the power supplying during generating for analysing the same. This item is specifically excluded from Rule 57Q. Therefore, not eligible for credit."

X(b) Findings

The Commissioner (Appeals) has given the finding that the item in question is an apparatus used in the `capital goods' recording the fluctuations occurring in the power supply during generation for analysing the same. Therefore, the item in question is covered by the definition of `capital goods' under Rule 1(a) of Rule 57Q. In any event, this is a part of captive power plant and such captive power plant is covered under Explanation 1(a). Therefore, the apparatus in question is covered by the Explanation 1(b) of Rule 57Q. The findings of the Commissioner (Appeals) that these are excluded from Rule 57Q are incorrect for the reasons mentioned in respect of Item No. IV above.

XI Flame Proof Equipment

XI(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These are the parts of the plant. These are the flameproof equipments fitted in TEG and CP area of POY plant.

These are basically safety equipments used to save the electrical and other equipment for flames and sparks and hence, are not used for producing, processing or for brining about any change in any substance. Hence they are not qualified to become capital goods under Rule 57Q."

XI(b) Findings

The Commissioner (Appeals) has therefore accepted that these equipments are parts of the plant. The plant in question is undisputedly covered by the definition of capital goods in terms of Explanation 1(a) to Rule 57Q. Therefore, these items are covered by Explanation 1(b). Hence, denial of credit is incorrect.

XII S.S. Powder

XII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"This is part of the Spin Pack Assembly of the POY Plant. The SS Powder acts as a physical filter in extruding the molten polymer into yarn.

These goods aid in extruding the molten polymer into yarn and that S.S. Powder is more of the nature of raw material i.e. it is an input rather than capital goods and therefore not eligible for credit under Rule 57Q."

XII(b) Findings

Here also the Commissioner (Appeals) has specifically accepted that this is the part of spin pack assembly of the POY plant. Hence, the item is squarely covered by the Explanation of sub-Rule 1(a) to Rule 57Q. In any even of the matter and without prejudice as per the interpretation of the Commissioner (Appeals) these items are in the nature of input. In such an event, the credit under Rule 57A ought to have been extended instead of denying the credit. The reasons mentioned already in respect of Molecular Sieves (under Sl. No. III) above are equally applicable to this case also.

XIII Hydraulic Pallet Truck/Spring Hangers & Supports.

XIII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"This is an accessory of POY plant performing the function of handling the packed POY stacked on pallets for their storage/loading at the warehouse. The adjudicating authority rightly disallowed modvat credit on the said capital goods on the ground that it is not used for producing or processing or for bringing about any change in any substance because the role of item is after the goods are produced. This items does not fulfil the criteria laid down by the Supreme Court judgment in Rajasthan State Chemical Works. Therefore the citations quoted are not applicable."

XIII(b) Finding

The Commissioner (Appeals) had accepted that this is an accessory of POY plant and it performs the function of handling the packed POY stack for their storage/loading at warehouse. Hence, the item is covered by Explanation 1(b) to Rule 57Q. In any event of the matter and the item itself is an equipment performing the functioning of handling of the goods in the factory. They are material handling equipment covered by the Explanation 1(a) to Rule 57Q. In the following decisions, it has been held by the CEGAT that material handling equipments are capital goods and eligible for modvat credit; (1) CCE v. Cosmo Ferrites Ltd., 2002 (148) ELT 1232; (b) Malabar Cement Ltd. v. CCE, 2002 (149) ELT 751 (Tri) maintained by Supreme Court in 2003 (153) ELT A94; (c) CCE v. Vikram Cement 2001 (132) ELT 662 (Tri).

XIV Catalyst Support Spring

XIV(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"This is part of the MEG Plant. It performs the function of supporting the catalyst inside the vessel to ensure optimum reaction during manufacturing the final product.

This item fitted at MEG plant performs the function of supporting the catalyst inside the vessel is only a support and cannot be capital goods. Credit has been rightly denied."

XIV(b) Findings

Here also the Commissioner (Appeals) accepts that it is part of MEG plant. Hence, the item is squarely covered by Explanation 1(b) to Rule 57Q.

XV Track Ball Assembly

XV(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These goods fall under 8472, 8475 and 9032. So far as goods falling under 8472 is concerned the same are excluded from the purview of capital goods, modvat credit is therefore not eligible on this item."

XV(b) Findings

The reasons already mentioned in respect of Transformers (Item No. IV above) are equally applicable to this item also.

XVI Connectors AEC-02R-20-455QC.

XVI(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"This is fitted at the POY plant performing function of connecting tubes of different radii with the pressure equipment which is essential for measuring the pressure of process chemicals during manufacture of final product 57.2. The adjudicating authority has denied credit on the ground that the said item is used for conveying and not used in producing, processing or for bringing about any change in any substance during production, hence does not qualify to become capital goods under Rule 57Q of Central Excise Rules, 1944. I agree with him.

XVI(a) Findings

In view of the findings of the Commissioner (Appeals) the item form part of the POY plant. Hence, it is covered by Explanation 1(b) to Rule 57Q. The reasoning that part itself need not perform the function of producing or process or for bringing about any change in any substance during the production is equally applicable to this items also.

XVII Industrial Air Screw Fan Type AS.

XVII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"This fan is fitted at the Control room of the Captive Power Plant and is essential for providing ventilation. Control Rooms are essentially used for the operation DCS systems in process/chemical plants."

XVII(b) Findings

The aforesaid findings of the Commissioner (Appeals) would clearly show that the item is a part of captive power plant. Hence, the fan is covered by Explanation 1(b) to Rule 57Q.

XVIII Spares for Heater Plant, Studs with Buts.

XVIII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These fasteners for assembling the various components and parts to make the entire plant. Due to their very large size/dimension, various sections of the plant are received from the supply source in knocked down condition. At the installation site, the components are assembled together/fitted/installed to make a complete plant. The studs and nuts are used for fastening the components during such assembly/installation. The role of these items is to the extent of fastening the parts of the plant. These are therefore not eligible for credit."

XVIII(b) Findings

The reasons already mentioned for Item No. (I) supra namely the fasteners are equally applicable to the aforesaid items also. Hence, the credit is correctly taken.

XIX Pneumatic Impact Wrench

XIX(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid item is as under:

"This tool perform the essential function of fixing the spin pack assembly which is an essential part of the spinning machine of the POY plant. This spin pack assembly contains SS powder which acts as a physical filter in extruding the molten polymer into yarn. The SS Powder has to be regularly replaced in the pack assembly as it gets clogged with polymer during continuous use. The Pneumatic impact wrench is used for removing and refitting the spin pack assembly. From the use of this item it is seen that the same is used only for removing and refitting the spin pack assembly. This item is therefore ineligible for modvat credit."

XIX(b) Findings

The above finding of the Commissioner (Appeals) itself clearly shows that the tools are used for producing the goods since, without the help of this item the spin pack assembly which is essential part of spinning machine of POY plant cannot be removed and refitted. Therefore, it is squarely covered by Explanation 1(a) to Rule 57Q to be called as capital goods.

XX Switch Board, Switch Bracket.

XX(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"Modvat credit on the said capital goods was disallowed on the ground that it is not used for producing or processing or for bringing about any change in any substance.

The impugned capital goods are parts of Switch Board. They are essential for providing electrical connections to various sections of the plant for distribution of electric current needed for their operation/working. Parts of Switch Board as such play no part in the manufacture and cannot be granted credit."

XX(b) Findings

The items in question are part of switchboards. These are electrical items squarely covered by the decision of the CEGAT in the use of Jawahar Mills v. CCE 1998 (108) ELT 47 (Tri-LB) upheld by the Hon'ble Supreme Court in the judgment reported at 2001 (132) ELT 3 (SC). The submissions that parts of plant, machine, machinery need not play part in the manufacture so long as the machine, machinery, equipment of which it is a part are used for manufacturing process is equally applicable to this item also. Hence, these items are eligible for credit.

(XXI) Intrinsic Safety Barrier

XXI(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid item is as under:

"These are fitted in the digital control system (DCS) for interfacing of signals from the hazardous area in the MEG/PVC plants. They fall under CET 8536.90

In Kanoria Chemicals & Industries Ltd. v. CCE 1997 (95) ELT 301 (Tri) = 1997 (23) RLT 693 (T), credit has been allowed on HRC fuses (CET 8532.00) as switch gear cannot function without HRC fuses. However, without the safety barrier the DCS can work. They are therefore not eligible for credit judgments cited are irrelevant."

XXI(b) Findings

The only ground on which the credit is denied that this item is safety barrier of the digital equipments. However, the Commissioner (Appeals) has not disputed that it is a part of digital control system. Hence, this item is covered under clause 1(b) of Explanation (1) to Rule 57Q.

XXII Tube closure assemblies & enclosures

XXII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid items are as under:

"These are essential components of Spinning Machine of the POY plant and fall under CET 8448. The spinning machine performs the function of extruding the molten polymer for manufacture of yarn. The Tube Enclosures comprising of air jets blows down yarn which gets cut during extrusion into waste containers. This does not affect the production of yarn.

The said item not used in producing, processing or for bringing about any change in any substance during manufacture and therefore not eligible for credit."

XXII(b) Findings

The Commissioner (Appeals) accepts that these are essential components of spinning machine of POY plant. The spinning machine performs the function of extruding the molten polymer for manufacture of yarn. The items in question are therefore covered under Explanation 1(b) Rule 57Q as part of machine used for producing or processing of goods for manufacture of final product.

XXIII Spares of Microjet Printer.

XXIII(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid item is as under:

"These goods fall under 8472, 8475 and 9032. So far as goods falling under 8472 is concerned the same are excluded from the purview of capital goods, modvat credit is therefore not eligible on this item".

XXIII(b) Findings

The Commissioner (Appeals) has denied the credit only on the ground that the goods are falling under heading 8472. The findings of the Commissioner (Appeals) that heading No. 8472 is excluded is only on the basis that heading 8472 is not figuring in clause (d) of Explanation (1) to Rule 57Q. However, this interpretation of Commissioner is incorrect from the reasons pointed out in respect of the Item (IV) mentioned supra. Hence, credit is allowable in respect of this Microjet Printer falling under Heading 8472.

XXIV Spare parts for Industrial Sewing Machine

XXIV(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid item is as under:

"These are part of the PE/PVC/Bagging section. They perform the function of stitching the mouth of the bags, so that the filled final product does not spill out during storage/transport. The operation of stitching the mouth of the bag comes into the picture when goods are manufactured. Therefore, these items are not eligible for modvat credit."

XXIV(b) Findings

These items in question are part of PE/PVC/Bagging section. The ground based on which the Commissioner (Appeals) has denied the credit is that the goods have already been manufactured and the operation performed with these items are undertaken after the goods are manufactured. However, the process of bagging is also part and parcel of the manufacturing process. Therefore, these items are covered by the definition of `capital goods' either under Explanation 1(a) or under 1(b) of Rule 57Q.

XXVI Glass cloth Electrical Insulators

XXVI(a) The finding of the Commissioner (Appeals) denying the modvat credit on the aforesaid item is as under:

"These are the circuit insulators used at the Cracker plant. The adjudicating authority disallow credit on the ground that this goods are not used for producing or processing or for bringing about any change in any substance. I agree wi