TaxTMI 
TaxTMI 
2010 (4) TMI 411
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.... 1995. According to the Department the said Modvat credit was sought to be availed by the appellants claiming the items to be 'capital goods' within the meaning of the said expression under Rule 57Q(1) of the Central Excise Rules, 1944, when, in fact, the said items did not satisfy the requirements of the said expression. The adjudicating authority by its order dated 28th May, 2001 confirmed the demand to the tune of Rs. 41,81,811/- and ordered payment of interest thereon besides imposition of penalty of Rs. 50,000/-. Being dissatisfied, the matter was carried in appeal. However, the Commissioner (Appeals) by his order dated 17th August, 2004 partly allowed the appeal and modified the order while confirming the demand in relation to the major amount claimed thereunder. 4. The impugned order is sought to be challenged on two grounds. Firstly, that the items like oxygen and acetylene gases are used for cutting, repairing, installation and maintenance of plant & machinery, and without such activities the process of manufacture could not be continued. It would be commercially inexpedient to manufacture the final product without such essential activities and, therefore, the said acti....
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....s of manufacture of the final product, but the same were used in the process of installation or repairs or the maintenance of the plant & machinery and that the Notification No. 11/95 dated 16-3-1995 was not retrospective in nature. 7. Undisputed facts are that the period relevant for the decision in the matter in hand is from 1st November, 1994 to 28th February, 1995, that the final product manufactured in the plant was cement, and that the items were not used in the production of or in the process of manufacture of the said final product, but they were used in the process of installation and/or maintenance and repairs of the plant & machinery. The Notification No. 11/95 dated 16-3-1995 came into force w.e.f. 16th March, 1995 i.e. after the expiry of the relevant period. There are clear findings of facts in these regard and nothing is brought to our notice to point out any sort of perversity or any incorrectness in those findings. They are clearly borne out from the record. Even in the course of the arguments, no material was pointed out from the records to show that those items or any or more of them were used in the process of manufacture of the final product or were someway ....
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....specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely:- (i) All goods falling under Chapter 24, 56, 57, 58, 60,61, 62 or 63; (ii) All goods falling under heading Nos. 36.05, 37.06, 50.02, 50.03, 51.04, 51.08, 52.01, 52.02, 52.05 to 52.12, 53.02, 53.05 to 53.08, 54.08 to 54.12 and 55.07 to 55.12; (iii) All goods falling under sub-hearing Nos. 5001.10, 5301.10, 5301.20, 5301.90, 5303.10, 5303.20 and 5303.90." 9. In fact, based on the findings arrived at by the lower authority, which are borne out from the record, the appeal is liable to be dismissed. Besides, in the matter of J.K. Cotton Spg. & Wvg. Mills Co. Ltd. (supra), the Apex Court had clearly ruled that "The expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods manufacture of goods "should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goo....
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....nd it cannot be said that building materials fall within this description." 10. Considering the law on the point in issue, the Apex Court in J.K. Cotton Spg. & Wvg. Mills Co. Ltd. 's case (supra) after observing as under: "Without a design of the goods sought to be manufactured in a factory which is geared to production of goods of uniform pattern, it would be impossible to attempt manufacture of goods on a commercial scale. The production itself has to be of a set pattern, and deviation from the design pre pared would be impermissible. That without the use of drawing and photographic materials, designing of patterns would, if not impossible held that: "Drawing and photographic materials falling within the description of goods intended for use as "equipment" in the process of designing which is directly related to the actual production of goods and without which commercial production would be inexpedient must be regarded as goods in tended for use "in the manufacture of goods." 11. The Apex Court then ruled that: "If, having regard to normal conditions prevalent in the industry, production of the finished goods would be difficult without the use of electrical equi....
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....eld that, "Wires and cables would be covered by the expression 'plant' being an item necessary for the assessee to carry on his business and being an item not in the nature of a consumable, but an item having fairly high degree of durability". However, the said ruling was in fact situation where there was no dispute that those items do satisfy the requirement of 'capital goods' within the meaning of the said expression in Rule 57Q as regards the user thereof and this is crystal clear from the decision if the Apex Court in the same matter when the case was carried in Appeal before it. The Apex Court in the matter of Commissioner of Central Excise, Coimbatore v. Jawahar Mills Ltd., reported in 2001 (132) E.L.T. 3 (S.C.), held that: "The main contention of Mr. Rohtagi, however, is that the question whether an item falls within the definition of 'capital goods' would depend upon the user it is put to. The submission is that parts of the items in respect thereof availment of Modvat credit has been allowed by the Tribunal would not be treated as 'capital goods' as the manufacturer could not establish that the entire item was used in the manufacture of final product. To illustrate his ....
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....anufacture of fertilizers and not that it should be directly in the manufacture of fertilizer. It was held thus "The exemption notification must be so construed as to give due weight to the liberal language it uses. The ammonia used in the water treatment steam generation and inert gas generation plants, which are a necessary part of the process of manufacturing urea, must, therefore, be held to be used in the manufacture of ammonia and the raw naphtha used for the manufacture thereof is entitled to the duty exemption." [ supplied] It was only upon taking into consideration the phraseology of the notification and the undisputed facts of the case in hand that the Apex Court dismissed the appeal against the order of the Larger Bench. 17. An activity which is necessary for commencement or continuation of the plant which in turn helped commencement or continuation of the process of manufacture of the final product does not form part of the activity of such process of manufacture of the final product, nor the materials used for the former activity could be said to the materials used in the later activity. Cutting, repairing, installation and maintenance of plant and machinery d....