1999 (12) TMI 454 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of weigh bridges installed outside the factory premises for Modvat credit under Rule 57Q of the Central Excise Rules.
2. Definition and scope of the term "factory" under the Central Excise Act.
3. Distinction between Rule 57A and Rule 57Q regarding Modvat credit eligibility.
4. Applicability of judicial precedents to the definition of "factory" and the process of manufacture.

Issue-wise Detailed Analysis:

1. Eligibility of Weigh Bridges Installed Outside the Factory Premises for Modvat Credit Under Rule 57Q of the Central Excise Rules:
The appellants, manufacturers of V.P. Sugar and molasses, claimed Modvat credit on weigh bridges installed at cane purchase centers outside the factory premises. The Department issued a show cause notice alleging that the credit was irregular because the weigh bridges were not used within the factory premises. The Assistant Commissioner confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals), but the penalty was set aside as it was beyond the scope of the show-cause notice.

2. Definition and Scope of the Term "Factory" Under the Central Excise Act:
The appellants argued that the cane purchase centers, where the weigh bridges were installed, should be considered part of the factory as they were integral to the manufacturing process. They cited judicial precedents to support their claim. However, the Assistant Commissioner and the Commissioner (Appeals) found that the cane purchase centers were not covered by any certificate of registration under Rule 174 of the Central Excise Rules and were situated outside the registered factory premises. Therefore, the weigh bridges installed there were not eligible for Modvat credit under Rule 57Q.

3. Distinction Between Rule 57A and Rule 57Q Regarding Modvat Credit Eligibility:
The learned DR emphasized the difference between Rules 57A and 57Q, noting that while Rule 57A allows credit for inputs used in or in relation to the manufacturing process, Rule 57Q provides credit only for capital goods used in the manufacture of finished products. The weigh bridges, being used outside the factory premises, did not meet the criteria under Rule 57Q.

4. Applicability of Judicial Precedents to the Definition of "Factory" and the Process of Manufacture:
The appellants relied on the Patna High Court's decision in Rameswar Jute Mills Ltd. and the Tribunal's decision in Cothas K. Prakash, arguing that the cane purchase centers should be considered part of the factory. However, the Tribunal distinguished these cases, noting that the definition of "factory" under the Central Excise Act was different and that the weighment of sugarcane was an activity anterior to the manufacturing process. The Tribunal also referenced the Associated Cement Co. Ltd. case, but found it inapplicable as it pertained to Rule 57A, not 57Q.

Conclusion:
The Tribunal concluded that the weigh bridges were not used in the manufacture of sugar within the factory premises and thus were not eligible for Modvat credit under Rule 57Q. The appeal was dismissed, upholding the order of the Commissioner (Appeals).