TMI Blog1996 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, printed circuits and other items or Chapter and of Chapter 90 of Central Excise Tariff Act, 1985, namely master cord station monitor controller I/P assembly controller resistance, I/P cord as mentioned in the annexure to the show cause notice, which were not used for producing or processing of any goods or for bringing about change in any substance for the manufacture of the final product, namely, polyester fibre. The department was of the view that these materials are, for the purpose of only giving the required power supply, etc. to the machine and machinery used in the manufacture of the final product. They do not produce any electricity, but only facilitate supplying the requisite quantity of power to the plant. A show cause notice was issued on credit availed on these goods. The ground, as above, flows from the department s interpretation of the definition of capital goods given in Rule 57Q(1) of the Central Excise Rules, 1944, which provided for Modvat credit of duty paid on capital goods used by the manufacturer in his factory for utilising it for payment of duty on the final products and the Explanation thereto defining capital goods. 2. The Commissioner considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 444. The Supreme Court held therein that the process of handling and shifting of certain chemicals with the aid of power was an integral part of the process of manufacture. The ld. Sr. Counsel thereafter, submitted that the goods, in question, would also be covered by the provisions of the definition in Rule 57Q which covers component, spare parts and accessories of the machine, machinery, plant and equipment. These are the parts of the plant producing staple fibre. The term `plant is of wide connotation, for which the ld. Sr. Counsel cited the Supreme Court judgment in the case of C.I.T. v. Tajmehal Hotel reported in ITR (82) 44. The ld. Sr. Counsel, thereafter, made submissions relating to the technical aspects and explained the functioning of each of the items showing the importance of the goods in the process of manufacture of their final product. The function of each of them, as given in an Affidavit by the Deputy Manager of the appellants is as follows : (a) Power Supply Module Power supply module was procured and installed in the Polymerisation process for manufacture of polyester chips - process of which has been described above. This equipment generates + 24V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentally the brain for the whole system of manufacturing process of polyester chips, which control the operational data sequences programme and gives output signal to DMT/EG/Steam Valves to aforesaid reactors and the lines connected thereto and display the same in (sic) station product. The process could be effectively controlled to obtain the desired results for manufacture of polyester chips. (g) Sitor Unit This equipment is a thyrimisterised (sic) unit, which helps to control the speed of DC motor by supplying variable control voltage to the motors in the manufacturing process at various stages in the line connected to 4 line polycondensation reactors. (h) EPROM-8 KB Units This equipment loads the software to trans-esterification and polycondensation reactors in sequential way to maintain the reactions in the said reactors for converting the inputs into polyester chips/fibre. (i) Junction Box Junction Boxes are used mainly in field to establish a flame proof safe Junction of field instrument cable with main signal cable without creating any fire hazard. (j) Printer Circuit Boards These are sub-modules for CPU, which receives signals from various DMT/DG/Steam va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been permitted to be cleared under Rule 57S, subject to the provisions of this section and the conditions and restrictions as the Central Government may specify in this behalf : Provided that credit of specified duty in respect of any capital goods produced or manufactured - (a) in a free trade zone and used for the manufacture of final products in any other place in India; or (b) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park and used for the manufacture of final products in any place in India, shall be restricted to the extent of duty which 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to use of some article not in the main stream of the manufacturing process but in another stream of manufacturing something which is to be used for rendering final product marketable or used otherwise in assisting the process of manufacture. Such doubt is set at rest by use of the words used in relation to the manufacture . It is true that sand mould is not a raw material actually used in the manufacturing process of final product in the sense that when mixed with some other articles it would produce the final product. Sand mould is also not used in the preparation of some other article which is necessary to render the final product marketable. It is an article which has a significant role to play in the manufacture of the final product without being used in the main stream of the manufacturing process but without the use of which the final product will never come into being. When such is the case, it is reasonable to conclude that sand mould is used in relation to the manufacture of final product, namely steel castings. It is logical to hold that chemicals or resin which are used in the sand mixture for the purpose of producing sand mould are used in relation to manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 57Q defines capital goods by reference to Chapter, heading/sub-heading of Central Excise Tariff Act, 1985, and reads as follows : Capital goods means, following goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer, namely - (a) all goods falling under Chapter 84 (other than those falling under heading No. 84.07 to 84.09, Compressors falling under heading No. 84.14 and of a kind used in refrigerating and air-conditioning appliances and machinery, heading or sub-heading Nos. 85.15, 84.18, 8422.10, 84.24, 84.29 to 84.37, 84.40, 84.50, 84.52, 84.69 to 84.74, 84.76, 84.78, expansion valves and solenoid valves falling under sub-heading No. 8481.10 of a kind used for refrigerating and air-conditioning appliances and machinery); (b) all goods falling under Chapter 85 (other than those falling under heading Nos. 85.09 to 85.13, 85.16 to 85.31, 85.39 and 85.40); (c) all goods falling under heading Nos. 90.11 to 90.13, 90.16, 90.17, 90.22 (other than for medical use), 90.24 to 90.31 and 90.32 (other than of a kind used for refrigeration and air-conditioning appliances and machinery); (d) Components, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification No. 14/96-C.E. (N.T.), whereby Explanation to said rule was substituted by a new explanation, is clarificatory in nature as stated in the Finance Minister s Budget Speech, thus it would have retrospective applicability. This decision of the Tribunal does not seem to be correct inasmuch as Notification No. 14/96-C.E. (N.T.), by itself specify the different dates from which different amendments made by it, would come into force. Clause (ii) of Rule 1 of the said Notification reads as under :- (ii) They shall come into force on the date of their publication in the Official Gazette except that the rules 4 and 6 shall come into force on the 1st day of August, 1996 and rule 7 shall come into force on the 1st day of September, 1996. The amendment in question to Rule 57Q was made by Rule 10 of Notification No. 14/96-C.E. (N.T.), thus this amendment would come into force on the date of the publication of the said Notification in the Official Gazette. Notification No. 14/96-C.E. (N.T.) has since been published on 23-7-1996 in the Gazette of India, Part II(3)(i) at page 181 of the Issue No. 282, therefore, as per the statutory provisions, the newly substituted Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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