TMI Blog2017 (8) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The case of M/s. Bharati Airtel Limited is also not applicable in the facts and circumstances of the case, as in the present case actual SPM system is in use and required to be used for specific purpose. This is keeping in mind, the nature of business and final product produced/processed after obtaining this raw material through SPM system. In Vikram Cements vs. CCE, [2006 (1) TMI 130 - SUPREME COURT OF INDIA], the Supreme Court has specifically held that explosives in the mines are used for manufacture of final products and hence modvat credit cannot be denied even though not used in the factory. The impugned order, therefore, based upon the overruled judgment required to be set aside on this ground also as this case goes to the root of reasoning given by the learned Authority while rejecting the claim of the Appellant. We are inclined to observe that the expression “used in the manufacture of goods” take within its ambit in integral process and equipments connected with its ultimate production of goods. The material, equipments, in question are integral part of the manufacturing process and hence falls within the ambit of “capital goods”. Merely because SPM system is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of ₹ 4,22,15,023/, however, dropped the penalty so imposed. The Appellants therefore, have preferred the Appeal before the Customs, Excise Gold (Control) Appellate Tribunal, Mumbai (CEGAT) along with the Application for stay. The relevant law. 5 The learned counsel appearing for the Appellants and the counsel appearing for the Respondents read and referred the relevant provisions of the Central Excise Act and the Rules. 6 The Appellants have cited the judgments in support of their respective contentions and have filed their written submissions. Rule 57Q and the definition of capital goods which is reproduced as under: (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 (emphasis added) (a) Indian Copper Corporation Ltd. Vs. Commissioner of Commercial Tax 1965 (16) STC 259 (SC) It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. UOI 1981 (1) SCC 653 The assessee was transporting ore from mine to harbour. The Hon ble Apex Court held that the vehicles barges used for transportation of ore from mine/riverside to harbour and the equipments used in the harbour to load the ore was used for the processing of ore for sale. This decision was also in the context of Section 8(3)(b) of Central Sales Tax Act, 1956. (e) Jayswal Neco Ltd. Vs. CCE 2015TIOL70SCCX the Revenue proposed to deny modvat credit under Rule 57Q of the Central Excise Rules, 1994 on railway track material on the ground that railway track is not utilised directly or indirectly for producing or processing of goods or bringing about any change for manufacture of final product. Accordingly, the question arose before the Hon ble Court was as to in what manner such machines, machinery, plants, equipment, etc., is to be used for the purpose stated therein. The Hon ble Court applied the test laid down in the case of J.K. Cotton reported at 1965 (16) STC 563 (SC) and held that the railway tracks are installed not only within the plant, but the main objective and purpose for which the capital expenditure on laying these railway tracks is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid on capital goods used in mines away from the factory is admissible under Rule 57Q. The Hon ble CESTAT held that capital goods, which are being used in mines, outside the factory, are not eligible capital goods for the purpose of Modvat credit. The relevant portion of the decision is extracted hereunder: 5. In view of these decisions, there is no substance in the contention of the respondents that mining area is an integral part of the factory. Accordingly, capital goods, which are being used in mines, outside the factory, are not eligible capital goods for the purpose of Modvat credit. However, in respect of the conveyor belts, Modvat credit is available to the respondents as the Revenue has not rebutted their contention that the same is used exclusively in plant only. We, therefore, reject the appeal of the Revenue with regard to conveyor belt. We do not find any substance in respondents plea about dumper being used to transport crushed limestone from mining area and it is not used in their factory. Thus, the respondents are not eligible to avail Modvat credit of duty paid by them in respect of capital goods, subject matter of these appeals, except the conveyor belts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the said word had been expounded in the explanation to Rule 57A of the Modvat Rules . We cannot agree with this reading of the Section. As we have said there was only a re-arrangement of the several provisions of Rule 57B in Rule 57AA. Rule 57AA is in fact more broad based than Rule 57B. 22. Second, the Court proceeded on the basis that under the Cenvat scheme there was no provision similar to Rule 57J of the Modvat scheme. As we have seen, Rule 57J was replaced in substance by Rule 57AB. This provision was overlooked. 23. The third reason given by the Court in J.K. Udaipur Udyog for holding that the Cenvat Scheme was different from the Modvat scheme was Rule 57AC(1). However, that Rule is limited to inputs received in the factory of the manufacturer and does not impinge on Rule 57AB at all. 24. The schemes of Modvat and Cenvat credit are not therefore, different and we are unable to agree with the conclusion of the Court in J.K. Udaipur Udyog that the decision in Jaypee Rewa Cement (supra) would have no application to Cenvat Rules. 25. In our opinion the doubt expressed by the referring Bench about the correctness of the decision in CCE v. J.K. Udaip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tten submissions. The Supreme Court judgment in Madras Cements Limited vs. Commissioner of Central Excise, (2010) 6 SCC 606 is cited in support of the impugned order and further saying that onus is on the assessee to seek Modvat credit entitlement and, therefore, required to identify machinery capital goods, eligible for Modvat credit. The burden is heavily upon them to prove that such capital goods had been used in components, spare parts, accessories for manufacture of the finished product. Reliance is also placed on Saraswati Sugar Mills v. Commissioner of Central Excise, DelhiIII, (2014) 15 SCC 625 referring to Rule 57Q and the concept component part to be eligible for availing of Modvat credit. The factual aspects of the Appellants' capital goods 8 The petitioners imported the complete Single Point Mooring system along with anchor chain, chain stoppers, anchor piles anchor pipes and other items such as offshore bands, half shell brackets, anode pipes etc. SPM system was classified under CSH 98.01 as item of machinery at the time of import. 9 The Single Point Mooring (SPM) buoy is located in Mid Sea (Arabian Sea), Off. Suvali Coast, in Magdalla Port territo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al through the pipelines directly to the tanks. The anchor piles and chain stoppers hold the mooring system afloat. The function of the item is to facilitate berthing of the vessel. The law materials namely Naptha, Paraxylene and other petroleum products were pumped through SPM to various plants for consumption. There is no issue further that this pipelines run underwater on the sea bed for about 4.85 kms are then buried underground for another 7.15 km to reach the RIL tank farm. These pipelines are then connected to the tank farm through metering stations no. 2 3 from where additional pipelines are laid to divert the material to various tanks. Admittedly, the SPM buoy is located in Posn. Latitude 21 Deg 08 min 56.508 sec N, Longitude 072deg 34 min 25.943 sec E in Gulf of Khambat at a distance of approx. 5 kms from Suvali and about 12 kms from tank farm. These tank farms are located within the factory premises and are part of the ground plan submitted to the Central Excise department for registration. The Appellants build a jetty for loading and unloading operation of raw material and final products. Huge amount is invested in the Hazira Complex. Various capital goods on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the Authorities themselves have given the benefit of other capital goods like wires, cables, pipes, tubes etc. Therefore, for the same reason, according to us, this SPM system and connected apparatus, equipments also meet the parameters of definition of capital goods under Rule 57Q of the Act. 16 We have to consider the technology and machinery which are available for bringing the raw material for final product/produce. This may be of any nature, including transportation and/or such other mechanism. SPM system as noted, is regularly used for supply of socalled raw material which ultimately, leads to the factory and products are finally processed and produced that resulted into final products. We are inclined to observe that SPM system in question for the reason so recorded falls within the ambit of capital goods in the form of components, spares and accessories as reiterated in Madras Cements vs. Commissioner of Central Excise (supra). 17 The Appellants, in the present case, is not claiming that items used in making those SPM system to manufacture it. The scheme is that SPM system and its integrated part which is on going mechanism supported by the spares and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spinning Weaving Mills Co. Ltd.'s case. [ AIR 1965 SC 1310: (1965) 1 SCR 900. It is clear that the railway tracks are installed not only within the plant, but the main objective and purpose for which the capital expenditure on laying these railway tracks is incurred by the Appellant is for transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle car where hot metal is poured into pig casting machine for manufacture of pig iron. It is clear from the above that the use of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the aforesaid activity for which railway tracks are used, there cannot be manufacturing of pig iron. 16 We find from the order of the Commissioner that in spite of taking note of the aforesaid use of the railway tracks and accepting the same as correct, the Commissioner denied the relief to the Appellant on an extraneous ground, i.e., railway tracks were used for other purposes as well, namely, apart from conveying hot metal and hot pigs, it was used for carrying raw materials and finished goods as we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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