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TMI Blog1992 (10) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference Application had originally been filed against the order of the Tribunal. That order of the Tribunal disposed of two appeals - one by the Collector and the other by M/s. Straw Products. Since there should be two separate Reference Applications, as there were originally two appeals, the present Reference Application has been filed separately. The delay is marginal and may be condoned. Further, along with both the Reference Applications, Stay Petitions seeking stay of operation of the above-mentioned CEGAT order dated 31-10-1991 pending disposal of the case, have been filed. It is stated that the Tribunal s decision would have a serious and recurring revenue implications. 3. The Miscellaneous Application for condonation of delay is allowed and the Reference Applications taken up for disposal. The Stay Petitions will be dealt with later in this order. 4. In the order in question, this Bench had held that M/s. Straw Products Ltd., who are respondents herein are entitled to the benefit of Modvat credit in respect of wire netting of stainless steel and phosphor Bronze and felts (articles of textile material) which are not machine, machinery, equipment, appliances etc. and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri A. Choudhuri, learned Departmental Representative. He briefly referred to the manufacturing process to bring out the nature of the goods in question and manner of their use in the manufacture of paper. He contended that felts and wire-netting are parts of paper making machine and in view of the dictionary definition of machinery covering working parts of machine also, they would not be eligible for Modvat benefit, as machinery also figures in the Explanation clause of Rule 57A as excluded inputs. For disallowing the stand taken in the presentation of the appeal that the scope of the expression machinery in the Explanation clause of Rule 57A would cover working parts of machines also, the Tribunal had held that the said expression machinery occurs in the company of other items like machines, plant, equipment, apparatus, tools or appliances which are complete items and in their company machinery can cover only complete items or set of items which function independently and not parts of machine which are not independent items. This view of the Tribunal may not be correct, Shri Choudhuri submitted as tools do not function independently but require to be fitted to a machine for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. In fact, the Collector has relied upon this very judgment while seeking to make out that felts and wire-netting do not qualify for modvat credit. While Collector s contention in that regard is not acceptable and the matter has been rightly decided by the Tribunal, he has sought to deny the beneficial effect of the same judgment as far as the chemicals/resins are concerned. The reliance on this judgment by the Tribunal for allowing Modvat credit thereon is fully justified. The contention of the department that felts and wire-netting are to be treated as parts of the paper making machine and, as such parts, they get covered by the entry machinery which, by Dictionary definition, would cover working parts of machines had been rejected by the Tribunal, relying, inter alia, upon the judgment of the Karnataka High Court in State of Mysore v. Kores (India) Ltd. 1979 (26) STC 87 (Mys.). This judgment of the High Court had been cited with approval by the Supreme Court while deciding the appeal of State of Uttar Pradesh v. Kores India Ltd. involving the very same issue. They held that Typewriter Ribbon is an accessory and not a part of the typewriter. The Collector has not challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his position, the provisions under Rule 57A for grant of Modvat benefit are more liberalised as the inputs are those goods used not only in manufacture but used in relation to the manufacture of final products. There is also no requirement that the inputs should be in the nature of raw materials or component parts. Hence, this difference is very vital and the judgment does not support the stand of the Collector for denying Modvat credit for Felts and Wire-nettings. In view of the clear and correct decision given by the Tribunal on the basis of relevant judgments, there is no case for making the reference. This Bench had dismissed a Reference Application filed by Revenue in Collector of Central Excise v. Telco reported in 1991 (32) ECR 167 following the criteria laid down by the Honourable Gauhati High Court in Commissioner of Income Tax, Shillong v. Basanta Kumar Agarwala, reported in 1983 Income Tax Reports Vol. 140 Page 418. The learned Counsel concluded his reply with the plea that the reference applications be dismissed. 11. We find that the questions of law suggested for reference to the High Court have been preceded but the points raised in the application itself. While the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se there would have been no need to use both the words separately. As Felts and Wire-nettings are machinery they get excluded from the purview of the expression input . Further, in the light of the Supreme Court Judgment in Ballarpur Industries, it is evident that these have their utilisation in manufacturing apparatus as distinct from the manufacturing process. 14. Regarding chemicals and resins used for treatment of water, the points raised by the Collector are as argued before us, which has been referred to earlier. 15. We now turn to the questions of law framed by the Collector reproduced at para-5, page-3 of this order), against each of which we give our comments: 15A. Question 1 : The Supreme Court s decision in the Ballarpur Industries case was in the context of Notification 201/79 regarding credit of duty paid on input falling under the then Tariff Item 68. After the 1982 amendment of the Notification, the inputs were to be utilised as raw materials or component parts in the manufacture of the final products. The contention of the learned Counsel for the respondents in this regard is quite valid and acceptable. As correctly pointed out by him, the provisions unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not include machine, machinery, plant, equipment, apparatus, tools or appliances . It was held by us in para 18 of our order that the materials in question cannot, by themselves, be treated as machines, machinery etc. and also as parts of paper making machine. We had also held in para 18 ibid that the stand of the department in the proceedings below that these are parts of machines will not affect their Modvat eligibility as parts do not figure in the relevant provision and cannot be inducted into it by analogy or corollary. We had considered the decision of the Mysore High Court holding that Typewriter Ribbons are not parts of Typewriters and held that, on the analogy of this decision, felts and wire-netting are not parts of paper making machine. The contention of the learned Counsel was that these being held to be not parts, the question of their being covered by the entry machinery does not arise even if the dictionary definitions of machinery sometimes cover parts of machines also. We agree with this argument and also the other point raised by him that this finding, namely, these are not parts of the machines has not been taken up in reference and has, therefore, become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity is to be resolved in this particular context by identifying the company in which the expression has been placed in the explanation clause of Rule 57A. We find the other items machine, equipment, appliance, apparatus and tools are complete articles are capable of independent functioning. Such is not the case with felt. It has to be fitted in the paper making machine for use. The Gujarat High Court had held in the Ambica Wood Works case (supra) that some solid structure with no moving parts cannot be termed as a machinery, but it would be machinery of such items, complete in itself, has moving parts in relation with others when they move interdependently by application of force. Thus, in order to be machinery, the following factors must exist : (i) a complete and integrated collection of several objects or articles; (ii) these objects or articles should interact in unison upon or with each other. 18. The restricted definition is not the only meaning applicable to machinery. Its scope extending to parts of machines is matched by the other common meaning covering complete machines or set or combination of machines. When several meanings are available for the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not covered in the exclusion. What are excluded are machines, plant, equipment, apparatus, tools or appliances, which are articles known as such machines, plant etc. Instruments and tools referred to by the Collector as being used after mounting on other equipment or machines and not functioning independently are nevertheless known only as such instruments and tools and being specifically hit by the exclusion in the Explanation Clause do not qualify for Modvat credit. Such is not the case with the goods in question, namely, felts and wire-netting. They are articles used in the paper making machine and are a consumable item requiring replacement periodically. The position of instruments which are used on a permanent or long-term basis is not the same. The question posed whether all the items listed other than machinery in the Explanation Clause should be complete items capable of independent functioning is an academic question. By their very nature, they are such complete items functioning independently. Some exceptions like certain tools and instruments do not detract from the thrust of the decision. 20. Question No. 4 : This again is an academic question having no practical a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Counsel Shri Lakshmi Kumaran the Tribunal s decision in Collector of Central Excise, Indore v. Gwalior Rayon Spg. (Wvg.) Mills had been upheld by the Supreme Court. That was also a case under Notification 201/79. We had held that the use of these materials which are consumable requiring replacement every now and then after use is in the manufacture of paper and not in relation to the paper making machine only, by being fitted therein. We have now considered the contentions raised by the Collector citing the Ballarpur judgment of the Supreme Court wherein the criterion of utilisation in the manufacturing process as distinct from the manufacturing apparatus had been laid down. We have found that this criterion is satisfied by the inputs in question which are not used as manufacturing apparatus. We have held them to be outside the zone of exclusion spelt out in Rule 57A. The points raised now regarding chemicals and resins used for treatment of water is easily disposed of in the light of the Ballarpur decision itself. The items are consumable items and are used in a process and they are not apparatus, machine etc. The only question is whether the process is that of manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following observations were made by the Supreme Court in Commissioner of Gift Tax, Bombay v. Smt. Kusumben D. Mahadevia : 1980 Income Tax Reports Vol. 122, page 38 :- ....Where the answer to the question of law is self-evident or is concluded by a decision of this Court it would be futile to make a reference and in such a case the Tribunal would be justified in refusing to refer the question to the High Court, vide C.I.T. v. Chander Bhan [1966] 60 ITR 188 (S.C.), Mathura Prasad v. C.I.T. [1966] 60 ITR 428 (S.C.) and C.I.T v. Indian Mica Supply Co. P. Ltd. [1970] 77 ITR 20 (S.C.) . The above findings of the Supreme Court were followed by the Gauhati High Court in Commissioner of Income Tax, Shillong v. Basanta Kumar Agarwala. Their observations are extracted below :- We are unable to appreciate the contention of the Revenue. Although S.256 (2) has been couched in a mandatory form to indicate as if the Tribunal were obliged to refer any question of law arising out of such order, it does not mean that the Tribunal is bound to refer a case in which it has merely referred to certain provisions of law and determined the point on the basis of the said provisions. In our opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not merit consideration and are rejected as such. Before parting with the case, we have to express our total disapproval of ! the observations contained in the Reference Applications about stretching the ; meaning of the expression inputs to limits beyond reason by incomplete I examination of statutory provisions and overlooking/misinterpreting the ex- | elusion provisions. According to the learned Collector making the present ; Reference Applications, such action or failure has raised a point of law and calls for making a reference application under Section 35G of the Central Excises and Salt Act. While it is entirely open to the Collector to point out errors in the order requiring a Reference, to call into question the order with snide references to stretching the meaning to limits beyond reason by incomplete examination etc. is totally unwarranted. While we would certainly welcome applications to have doubtful questions of law referred to the High Courts for obtaining the benefit of their advice, the scope of such a reference in the present case does not exist/ for the reasons exhaustively dealt with by us. For that matter, the order also has followed several decisions disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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