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TMI Blog1998 (3) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Rules. He also imposed a penalty of Rs. 3.00 lacs on the appellant under Rule 173Q. The appellants are engaged in the manufacture of Polyester Filament Yarn and Polyester chips falling under Chapter 54 39 of Central Excise Tariff Act, 1985. They were availing of Modvat credit of duty paid on capital goods under Rule 57Q of the Central Excise Rules, 1944. During the scrutiny of their monthly RT 12 returns for the period 1-1-1995 to 28-2-1995 it was found that the appellants had taken Modvat credit on goods claiming the same to be capital goods and on examination/verification, the department found that these goods according to department were neither used for producing or processing of any goods nor for bringing about change in any subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which they have an air conditioning plant, which is used to produce chilled water and to produce cool and controlled air; chilled water is required for changing the liquid form of polymer melt into solid form for making chips. The cool and controlled air produced by the Air conditioning plant is necessary for production of filament yarn. The ld. Chartered Accountant contended that all the six goods on which Modvat credit has been disallowed form part of the plant, and are hence covered by Clause 1(b) of the Explanation to Rule 57Q, which covered component spare parts and accessory of machines and machinery etc. used for producing or for processing of any goods as defined in clause 1(a) to the Explanation. 3. The ld. SDR Shri V.K. Pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will get clogged affecting output; therefore, it will be reasonable to hold that the cleaner will be eligible for Modvat credit as part of the plant. Pneumatic Cylinders Parts Thereof :- The ld. Chartered Accountant explained that these are part of the Pneumatic Cylinders which is a components of the Scraper used in the Polymerisation reactor which participates directly in the manufacturing of polymer and as such eligible for Modvat credit. As against this, the ld. SDR would draw attention to the Commissioner s finding that there was no proper clarification given as to how the material was used in the plant. However, we are of the view that the location of the scraper is inside the polymerisation reactors, and reactors have a direct ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is an industrial system and it produces chilled water which is essential for changing the liquid form of the polyester melt into solid form for producing polyester chips. The cool controlled air is very necessary as controlled for air temperature and maintenance of humidity and air purity at specified levels is called for producing good quality filament yarn. The Tribunal decision in the case of Commissioner of Central Excise v. Modi Xerox - 1996 (88) E.L.T. 530 (Tribunal) was relied upon in this context. The ld. C.A. pointed out that the Commissioner in the impugned order as relied upon the Tribunal decision in the case of CCE v. Shanmughraja Spinning Mills for disallowing Modvat credit on this item. But the ld. C.A. urged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at High Court Judgment. Therefore, we hold that these items in dispute qualify for Modvat credit. Electrode for Pilot Gun Assembly :- The ld. Chartered Accountant submitted that the item is component of the furnace in which Heat Transfer Oil is heated and is required for maintaining the high temperature required for the polymerisation process. However, the ld. SDR argued that this is only a lighting equipment used in the auxiliary plant not directly used for the manufacture of final product. We find that the function of these items is for activating Polymerisation reactors and as such will be covered by clause 1(b) of the Explanation to Rule 57Q as component part of the plant. Uster Tester :- The function of this tester according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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