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TMI Blog2001 (2) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... pollution control equipments/components/accessories for the purpose of manufacture and installation in their factory premises for generation of steam and electricity. The steam is used directly in the manufacture of sugar as well as for generation of electricity which in turn is to be used by the sugar factory and surplus electricity is sold to Tamil Nadu Electricity Board (TNEB) and adjacent distillery unit. The Assistant Commissioner, under Adjudication No. 180/95, dated 12-10-1995, disallowed the capital goods credit to the Assessee on the ground that capital goods credit under Rule 57Q has been made applicable for the boiler, boiler components, steam turbines and pollution control equipments, all falling under Chapter 84 of the schedule of the Central Excise Tariff Act, only from 16-3-1995 under Notification No. 11/95-C.E. (N.T.), dated 16-3-1995; that for the period prior to 16-3-1995, credit would not be allowed on the capital goods received into the plant; that as the major portion of electricity is to be sold to TNEB which is out side the factory premises, credit on capital goods meant for co-generation plant is to be disallowed as per proviso to Rule 57R; that as steam fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst this communication dated 20-3-1996, the Assessees went in appeal and Commissioner (Appeals), under second impugned Order No. 127/96 (T), dated 25-6-1996, remanded the matter to the Assistant Commissioner in terms of first impugned Order No. 30 to 31/96, dated 1-3-1996 and clarified that amended provisions of Rule 57A were wide enough to cover various components and parts used in the setting up of a co-generation plant and as per amended proviso to Rule 57D(2), input credit could not be disturbed on the ground that such inputs were used in the manufacture of capital goods, exempted for the time being. 2.6 This order has given rise to Appeal No. E/1348/96 filed by Revenue. 3. Shri N. Venkatraman, learned Advocate for the Assessees, submitted that the Assessees manufacture sugar from sugarcane and in the process get a substantial quantity of bagasse; that the Department of Non-Conventional Energy Sources of Govt. of India did research work for utilising the bagasse as fuel and introduced a scheme in 1994 of capital subsidy for setting up demonstration plants; that they were selected for demonstration project; that as per Tamil Nadu Govt s. Order No. 230, dated 16-6-1993, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... varied on the ground that such inputs are used in the manufacture of capital goods as defined in Rule 57Q and that capital goods are for the time being exempt from the whole of duty of excise leviable thereon or chargeable to nil rate of duty ; that third proviso to Rule 57D(2) provides as under : Provided also that the credit of specified duty shall be allowed in respect of inputs which are used for generation of electricity or steam used for manufacture of final products or for any other purpose within the factory of production. 4. He also stated that the steam generated by boilers is initially used in the turbo generator and then is wholly employed in the manufacturing process of sugar; that steam is not removed outside the factory and accordingly the Modvat credit in respect of inputs used in the manufacture of boilers cannot be denied to them; that the electricity is partly used within the factory and excess electricity is supplied to TNEB; that under Rule 57R, use of capital goods exclusively for the production of exempted final product, disentitles the capital goods from being eligible for capital goods credit; that as the electricity generated is partly used for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vat credit would be admissible in respect of inputs used in manufacture of capital goods used within the factory for the manufacture of the final product. Reliance was also placed on the case of CCE, Jaipur v. Hindustan Fibres Ltd., 2000 (39) RLT 1104 (CEGAT). 6.2 The learned Counsel mentioned that Tribunal in the case of CCE, Meerut v. Gangeshwar Ltd., 2000 (115) E.L.T. 653 (T) held that Modvat credit is available in respect of boiler material in terms of Rule 57D(2). The Tribunal also allowed capital goods credit in respect of turbines used for generation of electricity which in turn was used for running the plant and machinery for manufacture of sugar. He also relied upon the decision in the following cases :- (i) CCE, Meerut v. U.G. Sugar Industries Ltd. - 1998 (102) E.L.T. 186 (T) (ii) CCE, Meerut v. Triveni Engg. Works Ltd. - 1997 (96) E.L.T. 655 (T). Boiler, being an integral part of plant and machinery used in manufacture of sugar, to be regarded as capital goods even prior to 16-3-1995. (iii) CCE, Jaipur v. Shree Cement Ltd. - 2000 (117) E.L.T. 167 (T) (iv) Jawahar Mills Ltd. v. CCE - 1999 (108) E.L.T. 47 (T). 6.3 Finally, the learned Advocate relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llution control equipments have been included in the definition of capital goods only from 6-3-1995. Both these orders were passed before the decision of the Larger Bench of the Appellate Tribunal in Jawahar Mills Ltd. v. Commissioner of Central Excise, 1999 (108) E.L.T. 47 (T). The lower authorities are required to examine whether the impugned goods were for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. If the co-generation plant or boiler, turbine and pollution control equipments are meant for (i) producing or (ii) processing of any goods or (iii) for bringing about any change in any substance for the manufacture of final products, it is immaterial that these products were included in Explanation to Rule 57Q(1) by Notification No. 11/95-C.E. (N.T.), dated 16-3-1995 since the words used in Explanation 1(a) to Rule 57Q(1) are without and restriction except that the machine/machinery are used for producing or processing or bringing about any change. If any machine satisfies the criteria, it will be capital goods as per Explanation 1(a). In view of this alone, the matter has to go back to the Adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 57R(1) is exclusively and as the electricity generated by them is not exclusively given to TNEB and partly it is used for manufacture of their final products, i.e. sugar and molasses, the mischief of Rule 57R(1) would not apply to them. Again we observe that the words used in Rule 57R(1) are that the credit of the specified duty on the capital goods shall not be allowed if such capital goods are used exclusively for production of a final product which is exempt from the whole of the duty of excise leviable thereon. The Adjudicating Authority has to give his findings as to whether electricity is one of such product which is exempt from the whole of the duty of excise leviable thereon. Lastly, we also find that proviso to Rule 57R(2), as inserted by Notification No. 11/95 (N.T.), does not find place in Rule 57R(2) as substituted by Notification No. 6/97-C.E. (N.T.), dated 1-3-1997. It is also to be examined whether in absence of such a proviso , credit of duty will be allowable in respect of capital goods used for generation of electricity. We also do not agree with the learned Advocate for the Assessee that words or for any other purpose are not confined to use within fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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