1997 (5) TMI 262 - AT - Central Excise

Exemption - Power - Manufacture - Process and Processing , meaning of and distinction between

Issues Involved:
1. Fork Lift and Lift materials
2. Diesel Engine and parts of Generator Set
3. Boiler Components
4. Cables and Cable Trays
5. Weighing Scale
6. U.P.S.
7. Air-Conditioner
8. Transformer and parts, Controlled panel and accessories, and motor control system, Switch Boards and parts
9. Technical Control Station
10. Vacuum Pressure Calibrator
11. Thermometer accessories equipment, Pressure Gauge, Liquid level indicator, Anubar
12. Orifice Flange
13. Laboratory Equipments
14. Pipes, Valves and pumps, Rubber tubes for air-compressor, Metallic hose for conveying liquid
15. M.S. Trolleys and Steel Trays
16. Limitation on the Whole Demand

Detailed Analysis:

1. Fork Lift and Lift materials:
The appellants sought Modvat credit for fork lifts and lift materials used in the manufacturing process. The Tribunal referenced the judgment in M.M. Forgings Ltd. v. CCE, emphasizing that the definition of capital goods under Rule 57Q should be interpreted in the context of their use in the manufacturing stream. The matter was remanded to the original authority for reconsideration, requiring the appellants to demonstrate the essentiality of the fork lifts in their manufacturing process.

2. Diesel Engine and parts of Generator Set:
The appellants argued that continuous power supply is crucial for their manufacturing operations, and hence, generating sets should qualify for Modvat credit. The Tribunal noted that if the generator set was brought in SKD condition and assembled on-site, it should qualify for credit. The matter was remanded to verify the assembly and installation process.

3. Boiler Components:
The appellants contended that sterilization of equipment, facilitated by boiler components, is integral to their manufacturing process. The Tribunal observed that the lower authority did not adequately consider whether sterilization is an ongoing and essential part of the manufacturing process. The matter was remanded for a fresh examination of the integrality of the equipment with the manufacturing process.

4. Cables and Cable Trays:
The Tribunal upheld the denial of Modvat credit for cables and cable trays, referencing a previous decision in M/s. Velathal Spinning Mills. The definition of capital goods under Rule 57Q does not cover items solely used for transmitting electric current.

5. Weighing Scale:
The Tribunal acknowledged that weighing scales, similar to weighing bridges included under Rule 57Q1(c), are used for weighing batches of inputs in the manufacturing process. The credit facility was granted for weighing scales used in the manufacturing process.

6. U.P.S.:
The appellants argued that U.P.S. is essential for maintaining uninterrupted power supply, crucial for their continuous manufacturing process. The Tribunal noted that if U.P.S. is integrated with the manufacturing equipment, it should qualify for Modvat credit. The matter was remanded for verification of this integration.

7. Air-Conditioner:
The Tribunal upheld the denial of Modvat credit for air-conditioners, referencing the decision in M/s. Shanmugaraja Spinning Mills Pvt. Ltd. The definition of capital goods under Rule 57Q does not extend to air-conditioners as they do not directly participate in the manufacturing process.

8. Transformer and parts, Controlled panel and accessories, and motor control system, Switch Boards and parts:
The Tribunal observed that these items relate to the transmission and stepping down of electricity and do not satisfy the definition of capital goods under Rule 57Q. The denial of Modvat credit was upheld.

9. Technical Control Station:
The appellants claimed that the Technical Control Station is integrated with the manufacturing process. The Tribunal remanded the matter for the lower authority to verify this integration and reconsider the eligibility for Modvat credit.

10. Vacuum Pressure Calibrator:
The Tribunal upheld the denial of Modvat credit for vacuum pressure calibrators, categorizing them as maintenance equipment, which does not qualify as capital goods under Rule 57Q.

11. Thermometer accessories equipment, Pressure Gauge, Liquid level indicator, Anubar:
The Tribunal noted that the lower authority did not adequately examine the uses of these items. The matter was remanded for a fresh examination based on technical information.

12. Orifice Flange:
The Tribunal upheld the denial of Modvat credit for orifice flanges, as they do not qualify as capital goods under Rule 57Q.

13. Laboratory Equipments:
The Tribunal observed that the lower authority did not specify the purpose of the laboratory equipment. The matter was remanded for a fresh examination to determine whether the equipment is used for in-process testing, which could qualify as part of the manufacturing process.

14. Pipes, Valves and pumps, Rubber tubes for air-compressor, Metallic hose for conveying liquid:
The Tribunal upheld the denial of Modvat credit for these items, as they do not satisfy the definition of capital goods under Rule 57Q.

15. M.S. Trolleys and Steel Trays:
The Tribunal noted that the findings regarding fork lifts would apply to these items as well. The matter was remanded for reconsideration in light of the earlier findings on fork lifts.

16. Limitation on the Whole Demand:
The appellants argued that the demand was barred by limitation, claiming they were deemed to have taken credit on 10-5-1994 based on a departmental letter. The Tribunal noted that this plea was not raised before the adjudicating authority and remanded the matter for the original authority to consider the limitation issue based on available facts.

Conclusion:
The appeal was partially allowed, with several matters remanded to the original authority for de novo consideration and decision based on the Tribunal's observations and directions.

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