TaxTMI 
TaxTMI 
2015 (4) TMI 569
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....goods and parts which were detailed in the show cause notice issued under Rule 57Q of the Central Excise Rules, 1944 (hereinafter referred to as 'Rules'). The dispute has arisen in the following factual background. The appellant is engaged in the manufacture of pig iron falling under Chapter 72 of the Schedule to Central Excise Tariff Act, 1985. The appellant is availing MODVAT credit on various capital goods and parts thereof under Rule 57Q of the Rules. The respondent-authority had issued two show cause notices thereby proposing to deny the appellant the MODVAT credit availed by them under Rule 57Q on the following items: - S. No. Items on which credit denied Credit amount (Rs.) 1. Pipes & fittings used outside the plant for bringing water from river Kharoon 15,83,738 2. Railway track material used for handling raw materials, process goods 16,59,987 3. HDPE Tarpaulin used to avoid leakage of water from water reservoir 6,18,943 4. Loudspeaker used to pass on instructions to operate various equipment due to distance 27,336 5. Total credit amount 38,90,004 The Commissioner was of the view that the aforesaid goods....
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.... is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 (51 of 1975) equivalent to the duty of excise paid on such capital goods. Explanation. -For the purposes of this section, - (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 the manufacture 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 weigh bridges used in the factory of the manufacturer. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx It follows from the bare reading of the aforesaid provision that for the purpose of allowing credit on specified duty paid on the capital goods, such capital goods are to be used by the manufacturer in his factory and are to be utilised for the purpose of manufacturing of final product. The explanation gives the meaning of 'capital goods'. As per....
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....explained and expanded by the Court in the following words: - "In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods "in connection with" manufacture of or "in relation to" manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Court in which it was held that vehicles used by a Company (which mined ore and turned out copper in carrying on activities as a miner and as a manufacturer) fell within Rule 13, even if the vehicles were used merely for removing ore from the mine to the factory, and finished goods from the factory to the place of storage. Spare parts and accessories required for the effective operation of those vehicles were also held to fall within Rule 13. See Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxe....
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....at behalf. The expression "electricals" is somewhat vague. But in a factory manufacturing cotton and other textiles, certain electrical equipment in the present stage of development would be commercially necessary. For instance, without electric lighting it would be very difficult to carry on the business. Again electrical humidifiers, exhaust fans and similar electrical equipment would in the modern conditions of technological development normally be regarded as equipment necessary to effectually carry on the manufacturing process. We are not prepared to agree with the High Court that in order that "electrical equipment" should fall within the terms of Rule 13, it must be an ingredient of the finished goods to be prepared, or "it must be a commodity which is used in the creation of goods". If, having regard to normal conditions prevalent in the industry, production of the finished goods would be difficult without the use of electrical equipment, the equipment would be regarded as intended for use in the manufacture of goods for sale and such a test, in our judgment, is satisfied by the expression "electricals". This would of course not include electrical equipment not dir....
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....missioner that in spite of taking note of the aforesaid use of the railway tracks and accepting the same as correct, the Commissioner denied the relief to the appellant on an extraneous ground, i.e., railway tracks were used for other purposes as well, namely, apart from conveying hot metal and hot pigs, it was used for carrying raw materials and finished goods as well. This can hardly be a ground to deny the relief inasmuch as by incidental use of the railway tracks for some other innocuous purpose, it does not lose the character of being an integral part of the manufacturing process. The Commissioner has further observed in his order that the railway track is not utilised directly or indirectly for producing or processing of goods or bringing about any change for manufacture of final product. This conclusion, obviously, is completely erroneous and amounts to misreading of the process. Such an error has occurred because the Commissioner did not keep in mind the principle of law laid down by this Court in M/s. J. K. Cotton Spinning & Weaving Mills Co. Ltd.'s case, highlighted above. When we read the order of the CEGAT, we find that CEGAT has not even adverted to and examined....