2001 (4) TMI 309 - AT - Central Excise

Dispute over Modvat credit for measuring instruments resolved in favor of manufacturing company

The case involved a dispute over the disallowance of Modvat credit on measuring instruments used in the manufacturing process by M/s. Laxmi Precision ... Capital goods under Rule 57Q - definition of 'plant' - use in the process of manufacture - necessity for making the production process possibleCapital goods under Rule 57Q - definition of 'plant' - use in the process of manufacture - Whether measuring and testing instruments used in the manufacture of goods fall within the scope of capital goods as defined in Rule 57Q. - HELD THAT: - The Tribunal's conclusion that the measuring instruments are capital goods is sustained. The court relied on the High Court's reasoning in M/s. Siv Industries Ltd. v. CCE, which construed the word 'plant' in Rule 57Q broadly. The High Court held that, in the absence of any requirement that the use be directly in the production or processing, 'plant' should not be limited to items that physically form part of the production process and extends to goods necessary to make the production process possible. Applying that principle, measuring and testing instruments, used for testing and measuring dimensions of finished products and essential to completion of manufacture, fall within the wide meaning of 'plant' and thus qualify as capital goods under the rule. Because the High Court's reasoning directly governs the present facts, there is no merit in referring the question further. [Paras 4, 5]Reference petition rejected; measuring and testing instruments held to be capital goods within the meaning of Rule 57Q and no reference to the High Court is called for.Final Conclusion: The Reference Petition filed by the Revenue is dismissed; the Tribunal correctly upheld that the measuring and testing instruments are capital goods under Rule 57Q, following the authoritative construction of the definition of 'plant'. Issues:1. Disallowance of Modvat credit on measuring instruments under Central Excise Rules.2. Appeal against disallowance by Asst. Commissioner of Central Excise.3. Appeal allowed by Commissioner of Central Excise (Appeals).4. Second stage appeal filed by Revenue before CEGAT.5. Question of law referred to the Hon'ble High Court.6. Interpretation of the definition of capital goods under Rule 57Q.7. Application of the judgment of the Hon'ble Madras High Court in a similar case.8. Rejection of Reference Application by the Department.The case involves M/s. Laxmi Precision Screws Ltd., manufacturers of nut, bolts, screws, and parts under Chapter Sub-heading 7318.00 and 8714.00 of the Central Excise Tariff Act, 1985. The Asst. Commissioner of Central Excise disallowed Modvat credit on measuring instruments used for testing and measuring dimensions of finished products. The Commissioner of Central Excise (Appeals) allowed the appeal, emphasizing the essentiality of measuring and testing in the manufacturing process. The Revenue's second stage appeal before CEGAT was rejected, upholding the lower Appellate Authority's decision.The Revenue filed a Reference Petition seeking clarification on whether measuring instruments qualify as capital goods under Rule 57Q of the Central Excise Rules, 1944. The judge noted the settled judgment of the Hon'ble Madras High Court in M/s. Siv Industries Ltd. v. CCE, Coimbatore. The High Court's interpretation of the term 'plant' in the context of the production process indicated a broad meaning, encompassing goods necessary to enable the production process. This interpretation extends to items beyond those directly involved in production, such as wires and cables essential for power supply to machines. The judge applied this interpretation to the case at hand, highlighting that measuring instruments, like wires and cables, are crucial for the manufacturing process, supporting the inclusion of such instruments as capital goods.Based on the Madras High Court's judgment and the broader interpretation of the term 'plant,' the judge rejected the Revenue's Reference Application. The ruling emphasized that the definition of capital goods should not be limited to items directly involved in production but should extend to goods essential for enabling the production process. As the matter was conclusively settled by the High Court's interpretation, there was no basis to refer the question of law to the High Court, leading to the dismissal of the Reference Application by the Department.