TMI Blog2003 (5) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ther countries. They have availed benefit of Modvat credit on the inputs said to have been used in the manufacture of said machines cleared for home consumption as well as for export. They have misdeclared certain bought out items as inputs and/or capital goods for claiming the benefit of Modvat credit though the impugned goods were merely brought into the factory's despatch section for further export by stuffing them into containers. They have also availed Modvat credit on certain goods under Rule 57Q of the CER declaring them as capital goods which also merely made a detour via company's premises en route to 'Vietnam' The goods, viz. Lathe machine, mill rollers turning lathe and KEC alternator are part of the respondents supplies to M/s. Vina Sugars, Vietnam to equip them with a machine shop and captive power generation station for the sugar plant. The department took the view that these items on which Modvat credit has been availed by the respondents declaring them as "capital goods" also fail to fit into the definition of "capital goods" under Rule 57Q of the CER as none of these items had been used in the factory premises of the respondents and these bought out items were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not Sugar plant in CKD condition. (e) When bought out items intended for erection/assembly of sugar plant cannot be treated as "inputs" used in or in relation to the manufacture of any finished goods (as sugar plant cannot be treated as goods) the question of applying Rule 57F(4)(ii) to such bought out goods does not arise. (f) The Commissioner was wrong in treating the entire sugar plant as finished goods. The Tribunal in the case of M/s. Tata Robins Fraser Ltd. reported in 1990 (46) E.L.T. 562 has held that Project itself being an immovable property, is not goods and hence not liable to excise duty. In the case of Quality Steel Tubes v. CCE reported in 1995 (75) E.L.T. 17 (S.C.), the Hon'ble Apex Court has held that where the goods are fixed firmly to the ground and where they become immovable property, the same are not dutiable and so also it is held by the Apex Court in the case of M/s. Mittal Engineer Works Pvt. Ltd. reported in 1996 (88) E.L.T. 622 (S.C.) 3.Shri P. Devaludu, learned DR appearing for the Revenue reiterated the above grounds and also referred to the comments received from the Commissioner, a copy of which was made available to the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of the final product. He has further pleaded that the contention of the department that the respondents have not filed any classification list for the sugar plant erected in foreign country and within the country is ab initio void as the department cannot expect respondents to declare 'Sugar Plant' under any of the chapters of CETA, 1985 as there is no such heading specified as complete plant in Central Excise. He has pleaded that the respondents had clearly specified in their classification list "machines/machineries including bought out items like components, accessories, etc., for the said machineries. As regards the capital goods such as lathes, mill rollers, bought from outside and removed as such to foreign country, he submitted that in terms of Rule 57S even capital goods brought inside the factory as has been done in the present case, could be removed, as such, and exported under bond without being used in the factory and the deeming provision permits Modvat credit. He further submitted that bought out items were tested for functionality and some were tested for alignment and some for quality and all the bought out items were exported. He has further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible to take Modvat credit in respect of the bought out items of sugar plant as also the capital goods received in the factory of the respondents and thereafter exported, as such, under bond together with other components/ machineries manufactured in their own factory. In this context it is necessary to appreciate the relevant rules viz. Rule 57A and Rule 57Q. In terms of Rule 57A, Modvat credit in respect of duty paid on the inputs which are used in the manufacture of the final product is admissible towards payment of duty of excise leviable on the final products. Likewise Rule 57Q as it existed at the relevant time provided for allowing credit of specified duty paid on the capital goods used by the manufacturer in his factory and for utilizing the credit so allowed towards payment of duty of excise leviable on the product. In the case before us, the impugned goods were neither required to be used nor were ever used in or in relation to the manufacture of the final product in the factory of the respondents. The respondents have also admitted that those bought out items were only ingredients to the Sugar Plant machinery. They have also stated in reply to the show cause notice th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident that the bought out items whether for project within the country or outside the country, were not necessary to have been brought within the factory whether the project undertaken is within the country or abroad and when there was no necessity to bring those impugned items within the factory, hence the question of intention to use the same within the factory does not arise. They have also admitted that they have not taken any Modvat credit on the bought out items for the project within the country as those items were not used within the factory. We observe that the benefit of Modvat credit is allowed to avoid any cascading effect on tax i.e. duty paid. In the present case, no duty is paid on the final product namely the sugar plant machinery and the question of any cascading effect also does not arise. In the circumstances narrated above, we are not able to countenance the plea of the respondents that sugar plant in CKD condition was exported as admittedly sugar plant was never assembled and then disassembled in the factory for export. Another point worth consideration is whether the sugar plant on erection is excisable goods or an immovable property. The Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 57A/57Q or the condition of utilization of the inputs/capital goods within the factory of the assessee for availing the credit. The respondents in the cross-objection No. E/CR/52/ 2002 have also referred to an order-in-original No. 46/95, dated 26-5-95 wherein the department has allowed the assessee to take Modvat credit on capital goods in similar circumstances. They have also relied upon order-in appeal No. 8/96, dated 12-1-96 wherein in similar circumstances the assessee's appeal against the order-in-original was allowed by the Commissioner (Appeals) and the department having not gone in appeal against the decision of the lower appellate authority, it has acquired finality. We have gone through the order-in-appeal and we observe that issue of eligibility to Modvat credit was not at all discussed in the appellate order as the issue before him was whether on procedural lapses, Modvat credit can be allowed or not and the lapse being venial in nature, the lapse was condoned by the lower appellate authority, whereas, here is a case where we are called upon to answer the question whether the respondents are eligible to take Modvat credit on the inputs/capital goods which have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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