TMI Blog2015 (5) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant provisions contained in Rule 57Q to 57U, as stood in 1999. 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 the test of being a constituent of machine etc. or the manufacturing process of finished goods. It thus cannot be said that "Welding Electrodes" form constituent of plant and machinery. One user mentioned is hardening of surface of mill rollers, trash plates, scrappers so that smooth crushing of cane can be carried out. Meaning thereby, that though machines are otherwise workable for the purpose of manufacture of sugar, for smooth functioning, "Welding Electrodes" are used to form a layer over the surface of mill rollers etc. to harden it. It does not mean that without user of 'Electrodes', the machines are unworkable. "Welding Electrodes" do not constitute an integral part necessary to the constitution of whole article and without which, article would not be complete, as observed by Apex Court in paragraph no. 13 of the judgment in Saraswati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 already availed be not disallowed and recovered under Rule 57U of Rules, 1944 read with Section 11A of Act, 1944. 6. Appellant submitted reply, claiming that it has validly availed credit but Deputy Commissioner, Custom and Central Excise, Division Moradabad rejected explanation and disallowed MODVAT/CENVAT Credit for aforesaid period. Aggrieved thereto, appellant preferred an appeal before Commissioner, Central Excise (Appeals), Ghaziabad (hereinafter referrred to as 'CCE(A)'). The appeal came to be dismissed vide order dated 13.10.2003. Thereagainst, Second Appeal preferred before CESTAT, which has been rejected by order dated 14.10.2004. 7. Tribunal has dismissed appeal for MODVAT/CENVAT Credit in respect to Welding Electrodes and Steel Flat Bars , but has allowed the same in regard to Winding Wires . Appellant has confined this appeal only in respect to denial of MODVAT/CENVAT Credit to Welding Electrodes . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituted 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: RULE 57Q. Applicability.- (1) The provisions of this section shall apply to goods (hereafter in this section, referred to as the final products ) described in column (3) of the Table given below and to the goods (hereafter, in this section referred to as capital goods ), described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final products. TABLE S. No. Description of capital goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer Description of final products 1 2 3 1 All goods falling under heading Nos. 82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) on goods falling under Chapter heading No. 98.01 of the first schedule to the said Customs Tariff Act, to the extent of 75% of the said additional duty paid on such goods. (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that under Rule 57Q(1), items mentioned in column 5 of the table, are certain goods which are within ambit of allowing credit, irrespective of heading of Chapters of Central Excise Tariff Act. The only requirement in respect to the items ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 this argument, observing that 'Welding Electrodes' does not fall within term 'component' of goods specified at serial nos. 1 to 4. 22. In M/s Star Paper Mills Ltd. Vs. Collector of Central Excise, Meerut [1989 (4) SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 component means a 'constituent part'. Further, 'constituent' means serving to form or compose as a necessary part'. In Advanced Law Lexicon, 3rd Edition 2005, (by P. Ramanatha Aiyar), the word 'component part' is defined as something which becomes an integral part of the goods in question by losing its physical and economic distinctiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the test of being a constituent of machine etc. or the manufacturing process of finished goods. It thus cannot be said that Welding Electrodes form constituent of plant and machinery. One user mentioned is hardening of surface of mill rollers, trash plates, scrappers so that smooth crushing of cane can be carried out. Meaning thereby, that though machines are otherwise workable for the purpose of manufacture of sugar, for smooth functioning, Welding Electrodes are used to form a layer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued 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 substance for the manufacture of final product would be 'Capital goods', and, therefore, qualify for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be 'Capital goods' and qualify for Modvat credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in our view, also has no application to facts of present case. 36. In K.C.P. Ltd. Vs. Commissioner of Central Excise, Chennai [2014 (1) SCC 597], Court held that assessee was not entitled for any MODVAT credit for the reason that it did not use purchased machinery in its factory and therefore, necessary condition incorporated in Rules for availing credit of MODVAT was not complied with. To avail MODVAT credit, 'input' on which excise duty is paid must be used in manufacturing final products in the factory of assessee. The aforesaid decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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