1997 (7) TMI 367 - AT - Central Excise

Cement and steel used to build a blast furnace: Modvat credit denied as not 'capital goods' u/r 57Q

Modvat credit was denied on whether cement and steel structures used to erect and fabricate a blast furnace qualify as 'capital goods' under Rule 57Q of ... Modvat - Capital goods - cement and steel structure was denied on the ground that it does not come under the definition of capital goods under Rule 57Q of Central Excise Rules, 1944. - HELD THAT:- According to the appellants, the cement and steel structure have a vital and peculiar role to play in the fabrication of the blast furnace. The steel structure are used in the fabrication of the shell as well as in the various components of blast furnace such as hearth, body, shaft, throat, uptakes, etc. and the cement is used in foundation of the blast furnace. Rule 57Q provides that capital goods mean 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. The argument of the appellants that cement and steel structure are the part of the blast furnace which is a plant in itself is not acceptable in view of the decision of the Honourable Supreme Court in the case of M/s. J.K. Cotton Spinning and Weaving Mills Co. Limited [1964 (10) TMI 2 - SUPREME COURT] where the Honourable Supreme Court held that building material used as raw material for construction of plant cannot be said to be used as plant in the manufacture of goods. The cement and steel structure used in erection of the blast furnace is a building material. In view of the above discussion, we do not find any infirmity in the impugned order and the appeal is dismissed. Issues:The denial of Modvat credit on capital goods (cement and steel structure) under Rule 57Q of Central Excise Rules, 1944.Details:The appellants, setting up a Blast furnace, claimed Modvat credit on cement and steel structure used in its erection. The issue arose when the authority denied the credit, stating that these items did not meet the definition of capital goods under Rule 57Q. The appellants argued that cement and steel structure are vital components in the fabrication of the blast furnace, falling under the definition of capital goods. They cited technical and legal dictionaries to support their interpretation of 'plant' to include buildings, land, machinery, and equipment used in manufacturing. Referring to legal precedents, they emphasized the broad interpretation of 'in the manufacture of goods' to encompass all processes directly related to production.The respondent, however, contended that cement and steel structure did not qualify as capital goods as per Rule 57Q. They maintained that these items, used in erecting the blast furnace, were akin to building materials and not considered part of the plant itself. Citing a Supreme Court ruling, they argued that building materials used for construction cannot be classified as plant in the manufacturing process.The Tribunal referred to Rule 57Q, which defines capital goods as machinery, equipment, tools, or appliances used in production or processing of goods. Despite the appellants' assertion that cement and steel structure were integral to the blast furnace, the Tribunal aligned with the Supreme Court's interpretation that building materials, like cement and steel structure, do not qualify as plant in the manufacturing process. Consequently, the appeal was dismissed based on this understanding.