TaxTMI 
TaxTMI 
2015 (4) TMI 569
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....7Q 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 were not covered within the definition of "capital goods" under Rule 57Q of the Rules. After giving opportunity to the ap....
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.... 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 clause (a) thereof, machines, machinery, plants, equipment, apparatus, tools or appliances which are used for producing or processing goods or in bringing about any change in any substance for the manuf....
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.... 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 Taxes, Bihar and Ors." In the process, the court also explained that there is no warrant for limiting the meaning of the expression "in the manufacture of goods" to the process of production of goods only. In the opinion of the co....
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....lectric 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 directly connected with the process of manufacture. Office equipment such as fans, coolers, air-conditioning units, would not be admissible to special rates under s. 8(1)." Applying the aforesaid test to the facts of this case, it is apparent that t....