2000 (11) TMI 147 - HC - Central Excise

Issues Involved
1. Availability of Modvat credit for wires and cables used in the manufacturing process.
2. Definition and scope of "capital goods" under Rule 57Q of the Central Excise Rules.
3. Interpretation of the term "plant" within the context of Rule 57Q.
4. Relevance of subsequent amendments and legislative intent.
5. Applicability of judicial precedents and principles of statutory interpretation.

Issue-wise Detailed Analysis

1. Availability of Modvat Credit for Wires and Cables
The primary issue is whether Modvat credit is available to a manufacturer of Viscose Rayon for wires and cables used to transmit electrical energy to blowers, which are essential for removing noxious gas generated during the manufacturing process. The court noted that without these blowers, workmen could not continue to work due to the harmful gas, establishing a nexus between these items and the manufacturing process.

2. Definition and Scope of "Capital Goods" under Rule 57Q
The Modvat scheme, introduced in 1986 and extended to capital goods in 1994, allows credit for specified duties paid on capital goods used by the manufacturer. The definition of "capital goods" under Rule 57Q(1) includes machines, machinery, plant, equipment, tools, and appliances used for producing or processing goods or bringing about any change in any substance for the manufacture of final products. The applicant argued that wires and cables fall within the scope of "plant" as defined in Clause (a) of the definition.

3. Interpretation of the Term "Plant"
The court emphasized that the term "plant" is of wide import and should be interpreted to include installations necessary for manufacturing the final product. The court referenced the Supreme Court's decision in J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, which held that equipment necessary for the manufacturing process, even if indirectly related, qualifies as "plant." The court concluded that wires and cables, essential for supplying power to blowers, fall within the scope of "plant" under Rule 57Q.

4. Relevance of Subsequent Amendments and Legislative Intent
The court acknowledged the ambiguity in the initial years of the Modvat scheme regarding the definition of "capital goods." Subsequent amendments clarified that wires and cables were not excluded from the category of "capital goods." The court rejected the Revenue's argument that these amendments extended a new concession, instead viewing them as clarifications of existing ambiguities.

5. Applicability of Judicial Precedents and Principles of Statutory Interpretation
The court referred to several precedents, including the Supreme Court's decisions in Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise and State of Bihar v. Steel City Beverages Ltd., emphasizing the need to interpret statutory terms in their specific context. The court also highlighted the principle from Union of India v. Delhi Cloth and General Mills Co. that "manufacture" implies bringing into existence a new substance. The court concluded that the wires and cables, used to supply power necessary for the manufacturing process, qualify as "capital goods."

Conclusion
The court held that the wires and cables used by the manufacturer to supply power to blowers, essential for removing noxious gas during the manufacturing process, qualify as "capital goods" under Rule 57Q of the Central Excise Rules. The court answered the question in favor of the assessee, stating that the wires and cables fall within the scope of "plant" as defined in Clause (a) of Rule 57Q. The court also clarified that the Finance Minister's speech cannot determine the scope of the Rule. Each party was ordered to bear its respective costs.

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