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TMI Blog1997 (2) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... oria Chemicals v. C.C.E., Allahabad - 1997 (95) E.L.T. 301 (Tribunal) 3. Ashoka Synthetics v. C.C.E., Bhubhaneshwar -1997 (96) E.L.T. 190 (Tribunal) 4. Century Cements v. C.C.E., Raipur - 1997 (95) E.L.T. 655 (Tribunal) 5. Modern Petrofils v. C.C.E., Baroda - 1997 (96) E.L.T. 404 (Tribunal) 6. Jaypee Rewa Cements v. C.C.E., Raipur - 1997 (96) E.L.T. 167 (Tribunal) 7. Grasim Cements v. C.C.E., Raipur - 1997 (96) E.L.T. 354 (Tribunal) 8. C.C.E. v. Nav Bharat Paper Mills - 1996 (86) E.L.T. 501 (Tribunal) 9. Uttam Indl. Engg. Pvt. Ltd. v. C.C.E. 1996 (86) E.L.T. 498 (Tribunal) 10. Mahindra Mahindra v. C.C.E. - 1996 (87) E.L.T. 753 (Tribunal). 4. In respect of Item Nos. 9 to 13, he relied on the Circular M.F. (D.R.) Circular No. 276/110/96-TRU, dated 2-12-1996. Later, the representative conceded that they are not pressing their claim in respect of Item Nos. 9 to 13 in the matter and that they are agreeable for Modvat credit being disallowed as Sl. Nos. 9 to 13 are not capital goods. However, it is his contention that Sl. Nos. 1 to 8 are required to be granted the benefit in terms of the ratio laid down by the Tribunal. 5. With regard to Item No. 3, Spare parts for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is a continuous process plant for the manufacture of finished products. Sophisticated machineries, equipment and apparatus are installed for the operation of plant. Wires and Cables, being the integral part of the plant, cannot be segregated. Without Wires and Cables the equipment, apparatus and ultimately the plant cannot be connected with each other. Being a continuous operation plant, Wires and Cables are essential and integral part of each and every plant, machinery and equipment installed/to be installed for the manufacture of finished goods. Without Wires and Cables the plant cannot be energised and the Computerised Numeric Control (CNC) cannot be operated resulting in defeating the purpose Modvat credit for capital goods available under Rule 57Q on plants, machinery etc. 10. As regards the Spare Parts, they state that they primarily fall under Chapters 84 and 85. The spare parts are used by them in plant and machinery installed at Kashipur for manufacture of their finished products. Since the machines installed are used for producing or processing of any goods for manufacture of final goods, the machines if it is falling under Clause 1(a) of the definition of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectrical item by which electrical functions and other mechanical items are operated and therefore, it is an integral part of the plant and could be classified as a spare parts of the plant under Clause (b) of the definition of Capital Goods . 15. With regard to Switch Parts and Electrical Capacitors they state that Electrical Capacitors and its parts viz. Switch etc. are used in the electrical installation of their plant; without the capacitors, there is a possibility that regular supply of electricity to the process plant is affected which may be lead to tripping down of the plant which is not only a safety hazard as their plant is a continuous process plant and the tripping of the plant due to irregular supply of electricity could lead to a major explosion. Therefore, they contend that it is an essential and integral part of their plant which is required to be classified as an accessory of the plant. These falling within the definition of capital goods as an accessory. 16. With regard to Control Panels they state that it is a part of their Computerised Numeric Control Operations (CNCO), CNCO is the main equipment which operates the entire plant. Without CNCO the plant canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products; (b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and (c) moulds and dies, generating sets and weighbridges used in the factory of the manufacturer". 19. Thus, from these items, it has to be seen as to whether the disputed items involved in this case, have been used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products . This aspect of the matter has been lucidly explained and analysed by Hon ble Supreme Court in the case of C.C.E. v. Rajasthan State Chemical Works as reported in 1991 (55) E.L.T. 444 at paras 12, 13, 17 to 22 :- 12. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teps like pumping brine and filling the salt pans form integral part of the manufacturing process even though the change in the raw material commences only when evaporation takes place. The preliminary activity cannot be disintegrated from the rest of the operations in the whole process of manufacture. Similarly, when coke and lime are taken to the platform in definite proportions for the purpose of mixing, such operation is a step in the manufacturing process. It precedes the feeding of the mixture into the kiln where the burning takes place. The whole process is an integrated one consisting of the lifting of the raw materials to the platform mixing coke and lime and then feeding into the kiln and burning. These operations are so interrelated that without anyone of these operations manufacturing process is impossible to be completed. Therefore, if power is used in anyone of these operations or anyone of the operations is carried on with the aid of power, it is a case where in or in relation to the manufacture the process is carried on with the aid of power. 18. Learned Counsel for the appellant relying on the decision of the Gujarat High Court in Nirma Chemical Works Ors. v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or stacking, storing the same cannot be said to be a process in relation to manufacture. In the case of preparation of sodium sulphate, it is said that the process in or in relation to manufacture commences after the brine is placed in the salt pans. The Counsel submits that if every operation and/or activity and/or action is treated as a process in or in relation to manufacture then power is used in (i) erection of factory where steel, cement, bricks etc. are used; (ii) day-to-day transportation and (iii) use of electricity for lights, fans etc. These arguments are far-fetched. The activity in relation to which power is used is not to be considered into isolation where the activity is such that it forms an integral part of the whole process. The Gujarat High Court in interpreting the word `process has assumed that process is synonymous to processing and has drawn support from the observations of this Court in Chowgule Co. Pvt. Ltd. v. Union of India, AIR 1981 SC 1014. We are afraid, the observations had not been properly understood or applied in drawing inference that process when used in relation to manufacture must be one that produces a change in the commodity. It ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture and for this we can find no warrant in law. The word manufacture used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance , however minor in consequence the change may be." 21. Thus processing may be an intermediate stage in manufacture and until some change has taken place and the commodity retains a continuing substantial identity through the processing stage, we cannot say that it has been manufactured. That does not, however, mean that any operation in the course of such process is not in relation to the manufacture. While interpreting the same exemption notification in Standard Fireworks Industries v. Collector - 1987 (28) E.L.T. 56 (S.C.), it was held that manufacture of fireworks requires cutting of steel wires and the treatment of papers and, therefore, it is a process for manufacture of goods in question. The Notification purports to allow exemption from duty only when in relation to the manufacture of goods no process is ordinarily carried on with the aid of power. It was observed that cutting of steel wires or the treatment of the papers is a process for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he use of these items necessitates the function of the process of the goods and items along with the equipments acting complementary to each other bring about a change in the inputs for the manufacture of the final plant. As these disputed items are very much part of the machine, machinery, plant and equipment and that explanation (b) (c) of capital goods being an enlarged one to encompass components, spare parts and accessories of the aforesaid machine, machinery, plant, equipment etc., therefore, the disputed items cannot be excluded from the definition of capital goods . 21. The Tribunal has already appreciated these arguments in the case of J.K. Synthetics Ltd. v. C.C., as reported in 1996 (88) E.L.T. 785 in the light of Larger Bench decision of Sri Rama Krishna Steels v. C.C.E. - 1996 (82) E.L.T. 575. In the case of Gujarat Alkalies Chemical Ltd. v. C.C. - 1994 (70) E.L.T. 417, a single member Bench of WRB, held that capital goods have to be for production of goods or rendering series. 22. In Collector of Central Excise v. Nav Bharat Paper Mills (supra) Electrical transformers have held to be included in the term capital goods . It follows that the disputed items being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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