TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 569
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....NVAT Credit as 'capital goods' on "welding electrodes". 3. Though appellant has formulated six question of law, but, this Court finds that the only substantial question of law which has arisen in the matter is "Whether 'welding electrodes' can be treated to be 'capital goods' under Rule 57Q for the purpose of allowing MODVAT/CENVAT Credit thereon to the appellant assessee during the period of August 1999 to September, 1999?" 4. Dispute relates to the period, August 1999 to September, 1999. Appellant is a public limited company engaged in manufacture of Sugar. Molasses is its by-product. Appellant availed benefit of MODVAT/CENVAT Credit as 'capital goods' on Steel Flat Bar, Ferro Speed and Welding Electrodes during the period of August, 1999 to September, 1999. 5. Superintendent Central Excise, Range Dhampur, issued show cause notice on 21st December, 1999, stating that aforesaid items are not included as 'capital goods' in the table appended to Rule 57Q of Central Excise Rules, 1944 (hereinafter referred to as 'Rules, 1944), hence, credit has been availed in violation of Rule 57Q. Appellant was required to show cause, why credit alread....
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....ms of money with respect to raw materials used in the manufacture of excisable goods;" 11. The scheme was introduced by inserting Chapter AA containing Rules 57A to 57J. Initially MODVAT scheme was introduced with a view to avail credit on duty paid on exisable goods used as 'input' in manufacture of final products. From 1st March, 1987, similar scheme for allowing credit of money in respect of certain raw materials used in manufacture of certain exisable goods was introduced and Chapter AAA having Rules 57K to 57P was inserted. Scheme was further enlarged by inserting Chapter AAAA with Rules 57Q to 57U w.e.f. 01.03.1994 so as to permit availment of credit on duty paid on 'capital goods' which are used in manufacturing process. 12. In the present case we are concerned with credit admissible on 'capital goods' and therefore, we are confining ourselves with the relevant provisions contained in Rule 57Q to 57U, as stood in 1999. 13. All these three Chapters i.e. AA, AAA and AAAA were substituted by Notification No. 6/97-C.E.(N.T.), dated 01.03.1997. Rule 57Q, inserted by notification dated 01.03.1997 as amended in February, 1999, reads as under:  ....
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....er than for medical use), 90.24 to 90.31 and 90.32 (other than of a kind used for refrigeration and airconditioning appliances and machinery; 5 Components, spares and accessories of the goods specified against S. Nos. 1 to 4 above; 6 Moulds and dies; 7 Refractories and refractory materials; 8 Tubes and pipes and fittings thereof, used in the factory; 9 Pollution control equipment; 10 Grinding wheels and the like goods falling under sub-heading No. 6801.10; 11 Goods falling under heading No. 68.02; and 12 Lubricating oils, greases, cutting oils and coolants. (2)(i) The manufacturer of the final products shall be allowed credit of the duty of excise or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as "specified duty") paid on the capital goods. (ii) The manufacture availing of the credit may utilise the same for payment of duty of excise payable on the final products manufactured in his factory. (3) Notwithstanding anything contained in sub-rule (1), the manufacturer of the final products shall be allowed credit of add....
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....al that it has considered three appeals togather, covering period August, 1999 to September, 2001 and has taken care that provision prior to 01.04.2000 i.e. Rule 57Q was different and after 01.04.2000, statutory provision came into force was much different. Rules 57A to 57U were substituted by Notification No. 11/2000-CE(N.T.) dated 01.03.2000 w.e.f. 01.04.2000. Admittedly, subsequent amendments and substituted rules would have no application to the case in hand. 16. It could not be disputed before this Court that in Rule 57Q, as it was in August/September, 1999, Chapter 83 was not specified as 'capital goods' on which credit was available. "Welding electrodes" came under heading no. 83.11 but this was not specified in Rule 57Q of Rules, 1944 as eligible heading for taking credit as 'capital goods'. 17. When enquired from learned counsel for appellant, it could not be disputed that under various headings and chapters of Central Excise Tariff Act, which are referred in column 2 of table under Rule 57Q of Rules, 1944, items in Chapter 83 are not included and therefore apparently those items are not admissible for claiming MODVAT credit. It is however, then contended....
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....uipments like pump casing, valve bodies, motor bodies etc. These type of Welding Electrodes are used to filling cavities during use of the machinery. It has also been used at the time of installation of machinery and repair of the machines. Welding Electrodes grade Valmet-26 are used for welding cast iron parts of cane juice pumps, housing etc. Welding Electrodes Grade Valmet-308-L are used for welding of stainless steel parts of sugar mill machinery such as pumps sleeve, sulphur burner pipe lines, pan condenser and its pipe etc. 20. It was also argued that "Welding Electrode" has been held entitled for credit by various Tribunals at New Delhi, Mumbai, Bangalore and reliance was also placed on two judgments of Apex Court in Collector of Central Excise, Raipur Vs. Birla Jute Industries Ltd. [2002 (139) ELT 93 (SC)] and Collector Central Excise Coyambatore Vs. Jawahar Mills Ltd. [2001 (132) ELT 08]. 21. The manner in which appellant has explained to bring "Welding Electrodes" within the term 'component', in order to analyse the same we have to examine first, what a 'component' is. We may notice at this stage that sofar as Tribunal is concerned, it has rejected even ....
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....uch 'capital goods' which are manufactured in a factory and used within factory for production. If these twin conditions are satisfied, 'capital goods' are exempted from payment of excise duty. Court said that exemption notification has to be strictly construed and conditions for taking benefit under notification are also to be strictly interpreted. Courts are not expected to stretch words of notification or add or subtract words in order to grant or deny benefit of exemption notification. In the case in hand, this notification is apparently inapplicable. 26. Then coming to Rule 57Q, expression 'component' was considered by Court in Saraswati Sugar Mills (supra) by referring to disctionary meaning. In paragraphs no. 10, it said :- "10. The expression "components" is not defined under the Act. Therefore, reference can be made to dictionaries to understand the meaning of the expression "components". In Webster Comprehensive dictionary, it is defined as 'Constituent part'. In Oxford Advanced Learner's Dictionary, Volume 1, international Edition, the word "co....
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....product cannot be conceived of. 13. The meaning of the expression 'component' in common parlance is that 'component part of an article is an integral part necessary to the constitution of the whole article and without it, the article will not be complete'." (emphasis added) 28. Court thus held that iron and steel structures could not be said to be components until they are utilized as component parts for the finished products. It also disapproved Tribunal's reasonings, otherwise given in Delhi Tribunal's judgment in Simbhaoli Sugar Mills Vs. Commissioner Central Excise [2001 (135) ELT 1239]. 29. Looking to the aforesaid tests and observations made in Saraswati Sugar Mills (supra) and applying the same to "Welding Electrodes" to find out whether it would qualify to be 'capital goods', we find that as per own admission of appellant, these 'Electrodes' are used for welding of machines and machine parts which form part of repair work. If there is no damage in machine or no welding is required, "Welding Electrodes" would not be used at all. Meaning thereby, it fails ....
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....w Delhi. Obviously, Rule 57Q, up for consideration therein, was the one as inserted/introduced for the first time by notification dated 01.03.1994. There the term 'capital goods' was specifically defined in explanation 1 to Rule 57Q of Rules, 1944. This explanation 1, as initially introduced, was substituted by notification dated 23rd July, 1996. However, it is not there on the statute book on amendment made in 1997 which is up for consideration in this appeal. 31. Tribunal construed explanation defining 'capital goods' liberally and answered question in favour of assessee. In appeal, Apex Court agreed with the view that language used in explanation is liberal and substantially wide to include said items. Paragraph no. 4 of the judgment in Commissioner of Central Excise, Coimbatore (supra), read as under : "4. The aforesaid definition of 'Capital goods' is very wide. Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any sub....
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....to attract credit under Rule 57A as it stood in 1994-95". The Court found that explanation to clause C, introduced in Rule 57A by notification no. 4/94, refers to 'input' used as 'fuel'. Court noted that Government also made it clear that 'inputs' used as 'fuel' were entitled to MODVAT credit. The aforesaid decision relates to 'input' under Rule 57A and has no applicability to the case in hand. 35. There is a three Judge judgment in Vikram Cement Vs. Commissioner of Central Excise, Indore [2006 (2) SCC 351], but therein also CENVAT Credit was claimed on 'explosives' and other 'inputs' under CENVAT Rules, 2000, which replaced MODVAT Rules. The question up for consideration before the Court was whether MODVAT and CENVAT are basically same concepts or different. The Court considered earlier Rules relating to MODVAT credit and subsequent Rules relating to CENVAT Rules and found that it was only re-arrangement of earlier Rules, but, in substance both are common and not different. The otherwise view taken in Commissioner of Central Excise, Jaipur Vs. J.K. Udaipur Udyog Ltd. [2004 (171) ELT 289 (SC)], was over ruled. This decision, ....