TaxTMI 
TaxTMI 
2006 (2) TMI 55
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....er-in-Original dated 15-11-2002 held that, the said notifications envisage exemption duty for those goods which are used in the manufacture of final products. He referred to the Supreme Court's decision in the case of J.K. Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, 1997 (91) E.L.T. 34 (S.C.), according to which the building materials which are used for the construction of plants cannot be treated as capital goods used for the manufacture of final product to support his view. The learned Commissioner, therefore, confirmed the demand and interest raised against the appellants besides imposing penalty under Section 11-AC equal to duty demanded. Aggrieved by this order, the appellant has filed this appeal before us. 3. The main contention of the appellants is that, the goods, namely, REYNOBOND (aluminium sheets), Toughened Glass and Steel Doors are covered against the Serial Nos. 1 or 5 or 17 of the Table annexed to Notification No. 53/97-Cus. dated 1-3-1997, as amended. Similarly, these items, according to them, are also covered as per Serial No. 1 or 13 of Annexure I to the Central Excise Notification No. 1/95-C.E. dated 4-1-1995, as amended. It was also contend....
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....nd it is not the Department's case that the capital goods are not proved to have been found installed or otherwise used within the bonded premises. The goods imported by them are very much part and parcel of their bonded premises. They have never been diverted or removed out of their premises. It was reiterated that a quantity of 20.92 square meters of REYNO BOND and 14.4 square meters of Toughened Glass used in areas other than production area by them to maintain uniformity of colour etc. has already suffered the duty. It was also contended that a prayer made by them on 12-11-2002 for Joint Inspection of the site to resolve the disputed facts was side-lined by the learned adjudicating authority, which is a gross violation of principles of natural justice. 8.The learned Advocate also states that the goods-in-question are very much available in the bonded premises in which they are engaged in the manufacture of export articles and hence there is no question of diversion or clandestine removal. He pointed out that neither Notification No. 53/97-Cus. nor 1/95-C.E. has defined what is capital goods. However, Notification No. 14/96-C.E.(N.T.) dated 23-7-1996 which had amended Rule 57....
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.... establish that they were used more for aesthetic or decorative reasons than for any functional requirement, as contended by them. 12. The learned SDR recalls the following condition as contained in the Asstt. Development Commissioner, Department of Commerce's letter F. No. I-66/98-100% EOU-I dated 27-9-2000, while conveying their approval "The procedures and formalities under the Customs & Central Excise Law shall be complied with". 13. He also showed a sketch plan of the factory premises to prove that the so called "capital goods" found their use in total periphery facing the road but not even on the roofing. Further, they were found used only in patches and in pattern on the outer walls aesthetically and that too on the road side of the building. Saying that they were used "to protect the production hall from ultra-violet rays" as claimed by the appellants is, therefore, not tenable. According to him, they were actually used for decoration of walls as they had special shining effect. To prove this point, he also produced a copy of panchnama dated 10-11-2005 under which the Officers conducted physical measurement of the periphery (i.e. boundary in running length) of main....
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....ssee has claimed exemption in respect of table, chairs, air conditioners etc. which cannot be said to be "goods" used in the manufacture of cotton or filament yarn." (The learned Advocate for the appellants butts in to say that these observations are not pertinent to the case in hand, since the language of the notification here is different. The use of the words "in connection with the manufacturer of "has a wider reach as observed by the Apex Court in para 9 of the very same order.) 2000 (117) E.L.T. 125 (Trib.) - Hindustan Adhesives Ltd. v. CCE, Meerut "It is well settled that the definition of 'capital goods' in Rule 57-Q of the Central Excise Rules is restrictive and relates to goods used in production, processing, and bringing about any change in the substance for the manufacture of final products." 2004 (176) E.L.T. 155 (Trib.-Mumbai) - CCE, Mumbai v. Bhawana Exports "Commissioner's finding that investigation cannot be conducted during the currency of export obligation period is contrary to the Apex Court decision in the case of Sheshank Sea Foods Pvt. Ltd." (This order holds that in the case of non-fulfilment of export obligations, goods are liable to confisca....
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....ng) stating that they were not capital goods or accessories in as much as they were not used in connection with the manufacture of goods and also they were not strictly categorizable in any of the Sl. Nos. contained in the Tables annexed to the respective notifications, as contented by the appellants. We are of the view that the disputed goods do not appears to have been strictly used for the purposes for which they were brought. Even the appellants admit in para 5 of their appeal papers that "they were mainly being used in connection with the manufacture", even though a "small quantity" of 20.92 sq.m reyonbond and 14.4 sq.m of Toughened glass have been admittedly used by the appellants in areas other than production areas to maintain uniformity of colour etc. and the special type steel doors have also been found to have been used in the construction of the buildings by the respondents. It is, therefore, clear that the disputed items have not been used strictly in terms of the requirements under the two Notifications. The appellants have, however, tried to convince us that the disputed items can be brought under ....
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....capital goods and accessories thereof," it is clear that the said items have not been used for their declared "functional" characteristics. The appellants' contention is that the said items have been used for protecting/maintaining the production areas without which they could not have ensured the required quality of the export goods. However, this argument does not subscribe to the role of "capital goods" particularly as one notices their actual end-use. Entry No. 17 of the Table to Notification No. 53/97-Cus., however, seems to lend a "crutch" to the otherwise sagging pleas of the appellants on the end-use issue of the materials, though they have not produced evidence to the effect that they had obtained "prior approval" in r/o the disputed items from the Board of Approval. Even if such approval is made available, the other Notification (1/95-C.E.) does not envisage similar provisions. (d) Whether the Show Cause Notice issued on 23-7-2002 demanding duty and contemplating interest/penalty is invalid particularly since the appellants are regd. as 100 % EOU : While we are of the view that in the case of non-fulfilmen....