1997 (12) TMI 276 - AT - Central Excise

Summary

Issues:
1. Whether cement and steel structurals used in the fabrication of the blast furnace qualify as 'capital goods' under Rule 57Q of the Central Excise Rules, 1944.
2. Whether cement and steel structurals used in the erection of the blast furnace, which is considered a 'plant,' are eligible for Modvat credit as 'capital goods.'
3. Whether the term 'plant' includes the entire factory premises and buildings where manufacturing is carried out.
4. Whether the cement and steel structures used in the blast furnace are essential components eligible for availing credit under Rule 57Q.
5. Whether the Tribunal's reliance on the Supreme Court decision in M/s. J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, Kanpur was justified.

Analysis:

1. The reference application questions if cement and steel structurals used in the blast furnace fabrication qualify as 'capital goods' under Rule 57Q. The Tribunal's Final Order held that building materials for plant construction do not constitute input for goods manufacture. The Tribunal referenced the Supreme Court's decision in J.K. Cotton Spinning and Weaving Mills Co. Ltd., stating capital goods include machinery for producing goods. The appellants argue that blast furnace components are not covered by the Supreme Court's decision.

2. The applicants argue that blast furnace components like cement and steel structures are essential for manufacturing pig iron. They claim these structures are specially designed to withstand high temperatures and blasts, making them eligible for Modvat credit. They distinguish the Supreme Court's decision by stating it dealt with factory buildings housing machinery, unlike the present case involving blast furnace components.

3. The Tribunal defines 'capital goods' as machinery used for production or processing of goods. It questions if materials used to erect the blast furnace qualify as capital goods, as the erection process precedes the furnace's use for production. The Tribunal finds no fault in the Final Order, citing the Supreme Court's judgment in J.K. Cotton and Weaving Mills Co. Ltd. v. STO, Kanpur.

4. The Tribunal concludes that no legal question necessitating High Court reference has arisen in this case. As a result, the reference application is rejected, indicating that the cement and steel structures used in the blast furnace do not qualify as 'capital goods' under Rule 57Q.

This detailed analysis covers the issues raised in the judgment, including the interpretation of 'capital goods,' the relevance of blast furnace components, and the application of legal precedents in determining eligibility for Modvat credit.