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TMI Blog2009 (9) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts as capital goods in terms of Rule 57Q of the erstwhile Central Excise Rules, 1944 for the period from July 1995 to September 1995 and April 1996 to July 1996. While seeking to disallow the said credit sought to be availed by the respondent , several show cause notices came to be issued to the respondents on the ground that the items in question did not qualify to be capital goods in terms of the Rule 57Q of the said Rules. Upon hearing the respondents the Assistant Commissioner, Bhilai vide his order dated 29th April 2003 while disallowing the credit to the tune of Rs. 5.37 crores approx. allowed the credit of Rs. 8.24 crores approx. on various items holding the same to be eligible inputs in terms of Rule 57A of the said Rules. Being aggrieved by the order disallowing the credit the respondents preferred appeal and by the impugned order, the Commissioner (Appeals) allowed part of the credit of duty paid on various items amounting to Rs. 2,71,39,824/- but disallowed the modvat credit to the extent of Rs. 2,66,50,592/-. The respondents filed their appeal being Appeal No. E/3692/04 against that portion of the impugned order which disallowed the credit to the tune of Rs. 2,66,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls are disposed of, while other still remains pending, a question can arise as to whether the appeal filed by another party against the same order can still be heard and decided by the Court or by the Tribunal. In that regard, learned DR drawing our attention to the decision of the Apex Court in Mauria Udyog Ltd. v. C.C.E., Delhi II reported in 2002 (146) E.L.T. 37 (S.C.) and that of the Bombay High Court in Commissioner, Central Excise, Mumbai II v. Godrej Boyce Mfg. Co. Ltd. reported in 2009 (233) E.L.T. 446 (Bom.) submitted that though, normally once the appeal against the order of the lower authority is disposed of by the appellate authority, the order passed by the lower authority and which was under challenge in the disposed appeal gets merged in the order passed by the appellate authority and thereafter, it is not permissible for the appellate authority to re-open the matter in relation to the order passed by the lower authority. The said principle of merger, however, would not apply in a case where an appeal is filed against a part of the order passed by the lower authority, leaving the other portion of the order open for consideration by the appellate authority in anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of merger. For the principle of merger to apply the order must result in the challenge to the entire order becoming final. As observed by Supreme Court in State of Madras v. Madurai Mills Co. Ltd., AIR 1967 SC 681 there can be no fusion or merger of two orders irrespective of the subject matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. Thus merely because under Section 35B(4) the respondent on notice may file cross-objections, if cross-objection is not filed cannot result in holding that the doctrine of merger would apply and the appeal preferred against the directions of the CBDT has to be dismissed on the principle of merger. The law as settled and explained by the Supreme Court in the various judgments referred to would not support such proposition. The Appellate Tribunal in the absence of that part of the order not being challenged, cannot examine the legality or otherwise considering the statutory power conferred on the Tribunal under Section 35C. 32. Even if Revenue is respondent in the proceedings before the Tribunal, that would not exclude the jurisdiction under Section 35E merely because Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision or order appealed against. Laying the stress upon the expression appealed against it has been clarified by the Bombay High Court that doctrine of merger would not be attracted in the case where the appeal is restricted to a portion of the order passed by the lower authority. In that case, the merger will be only to the extent of the challenge in the appeal . In that regard, one has to ascertain what was the subject matter of the challenge and the scope of interference by the appellate authority in the order under challenge. 7. The Apex Court in Mauria Udyog Ltd. case, had clearly held as under - it is evident from the facts noticed above that the principle of merger has no applicability. The appeal of the Revenue was restricted to the reduction of the penalty amount by the Commissioner (Appeals). In the appeal of the appellant, the challenge was not only to the penalty but to the entire order including the order of the Commissioner confirming the demand and holding that the freight expenses of the appellant s factory to the buyers factory are includible in the assessable value. The restricted question which was the subject matter of the appeal of the Revenue, under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner (Appeals) are not borne out from the records and there was no sufficient opportunity given to the department to counter the claim of the respondents that some of the items were the inputs and not the capital goods. 10. On the other hand, it is the case of the respondents that the Commissioner (Appeals) has rightly allowed the credit in respect of the duty paid on the items in question and the decision in that regard is in consonance with the various rulings given by the Apex Court, the High Courts and the Tribunal. For availing a benefit under an exemption notification there is no bar against claiming a product to be the capital goods and in alternative as the inputs, as it is always for the assessee to choose the best available benefit to lessen the burden of duty on the assessee. It is their case that the findings arrived at by the Commissioner (Appeals) are clearly borne out from the records and the assessee had placed sufficient materials in support of their claim in relation to the items as the capital goods and in the alternative as the inputs. It is also their case that though the alternative plea regarding the items being the inputs was not specifically raised be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rule 57A in respect of the items relating to which the credit was initially sought to be availed under Rule 57Q on the ground that the same items cannot be classified as the inputs as well as the capital goods at one and the same time. It was also held that the assessee had failed to produce cogent evidence about specific use of those items in the process of manufacture of the final products. 13. The Commissioner (Appeals) has not dealt with the issue as to whether the assessee is entitled to get the credit shifted and regularised under Rule 57A if it fails to establish its claim relating to such items under Rule 57Q. The Commissioner (Appeals) has merely proceeded on the assumption that such process is permissible. As regards the seven categories of the items listed above, the claim of the assessee was allowed essentially on the basis of the contentions sought to be canvassed by the assessee and the inferences which were sought to be drawn therefrom. 14. While assailing the impugned order, the learned DR submitted that once the assessee chooses to avail credit by taking resort to the provisions of law comprised under Rule 57Q but fails to establish the claim in that regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taking us through the impugned order, the learned Advocate submitted that the reference to the materials on record by the lower appellate authority clearly reveals the required analysis of the materials to justify the findings arrived at. The very fact that the Commissioner (Appeals) has referred to the particular use of the product while arriving at the finding about the description of the goods and the entitlement of modvat credit benefit under specific rule , would disclose that there is no room to find fault with the impugned order. Reliance is placed in the decision in the matter of Commissioner of Central Excise, Coimbatore v. Jawahar Mills Ltd. reported in 2001 (132) E.L.T. 3 (S.C.), C.C.E., Jalandhar vs. Pioneer Agro Extracts Ltd. reported in 2008 (230) E.L.T. 597 (P H), C.C.E., Bhopal vs. Prism Cement Ltd. reported in 2006 (199) E.L.T. 777 (M.P.), C.C.E., Meerut II v. India Glycols Ltd. reported in 2008 (229) E.L.T. 516 (Uttarakhand), UOI v. Hindustan Zinc Ltd. reported in 2007 (214) E.L.T. 510 (Raj.), Aditya Cement v. UOI reported in 2008 (221) E.L.T. 362 (Raj.), Aditya Cement v. C.C.E., Jaipur reported in 2003 (159) E.L.T. 1005 (Tri-Del.), Maris Spinners Ltd. v. C.C.E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Collector of Central Excise, Bombay reported in 2002 (145) E.L.T. 502 (S.C.) = (2002) 7 SCC 145, in Kerala State Cooperative Marketing Federation Ltd. Ors. v. Commissioner of Income Tax reported in (1998) 5 SCC 48 held that it is clear that even if an applicant does not claim benefit under a particular notification at the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage . 19. In Shree Hari Chemicals Export Ltd. case after observing that Sub-rule (9) of Rule 56A of Central Excise Rules, 1944 debars an assessee from taking credit both under Rules 56A and 57A held that the same would not be applicable in cases where there is no such specific bar from shifting the claim for benefit from one Rule to another Rule when such benefits are available under more than one provision of law. It was specifically observed that a person cannot take benefit unless final order of assessment is passed. Only because in his books of accounts entries are made for taking of the credit in terms of one provision of the Rules, but the same having been found to be inapplicable, return of the credit is taken effect, that would not be any legal bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made under Rule 57Q that would not debar the assessee from establishing his claim for the benefit under Rule 57A even at the appellate stage. What is relevant to be seen in such a case is that whether the materials placed on record are sufficient to justify the claim under Rule 57A or not. To shift the claim for such benefit from one rule to anther rule cannot be denied in the absence of statutory bar being prescribed for such entitlement. The stage at which such shift in claim is made is immaterial . 23. Coming to the second point for consideration, it is undisputed fact that the respondents herein had initially claimed the benefit under Rule 57Q of the said Rules. The initial claim of the respondents in relation to the items in question was that the same were the capital goods. It is also matter of record that such claim was rejected by the adjudicating authority. The Commissioner (Appeals) however, has allowed the modvat credit in relation to certain items classifying the same as the inputs within the meaning of the said expression under Rule 57A, while the others as capital goods under Rule 57Q. For the reasons stated above, the power of the Commissioner (Appeals) in that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that all the parts mentioned are used for railway system whereby raw materials or finished products are transported from one place to another inside the factory premises, and therefore, the credit was admissible in respect of the said items. 25. As regard the third category of items, the Commissioner (Appeals) has held that the items used are spare parts for fixing the machine, machinery in different shops, that the adjudicating authority had disallowed the credit on end use of the items on the ground that respondents had not given the , particulars of machines for which they were used as the parts, and that they were items of general use and not a single case was identified by the adjudicating authority to entertain any apprehension about the use of the goods outside the factory/plant. It has been further held that even if nut bolt and screw are general utility items, the fact remains that those are parts of the machines which are specifically known as the capital goods under Rule 57Q. Therefore, credit on the said items has to be allowed. 26. As regards the fourth category of items, the Commissioner (Appeals) has held that credit has been disallowed by the adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon provided that such intermediate products or capital goods are used within the factory of production in the manufacture of final product or which duty of excise is leviable whether in whole or in part. Further, it has been observed that credit on such items was disallowed on the ground that the same are generally used for repair and maintenance of the plant machineries. It has been held that there is no logic in denying the credit and hence the credit has been allowed. 28. As regards the sixth category of items, it has been observed that sodium vapour lamp has been used by the respondents for lighting purposes in the various shops and mills and even if the item is used for lighting purpose, the same contributes to the proper functioning of the various machines during the night. As regards the other items in this group, it has been observed that for effective controlling of the quality of the goods, the various parameters like the temperature, moisture etc. are required to be monitored and controlled. Accordingly, the said items cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of final product. Similarly, in relation to Rule 57Q, the capital goods are defined as products which are used for any purpose mentioned thereunder or for producing or processing of any goods or bringing any change in the substance by way of manufacture of the final product. 31. The Apex Court in Jawahar Mills case has clearly held that while ascertaining as to whether the items are the capital goods within the meaning of the said expression under the said Rules, the test to be applied is user of the such items. 32. Analysis of the materials by the Commissioner (Appeals) as revealed form the impugned order nowhere refer to any material on record which could disclose the actual user of any of the items which were the subject matter of dispute. The Commissioner (Appeals) was required to decide the matter not merely on the basis of the submissions made on behalf of the assessee. The submissions were required to be considered with reference to the materials on record and to ascertain as to what extent the submissions find support from the records, whether the materials disclose the actual user of the items, whether the evidence on record supports the contention sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he moment that the assessee has failed to produce any evidence. It would be for the Commissioner (Appeals) to ascertain the same. The Commissioner (Appeals) in the case in hand having failed to comply with the obligation under the Act, as the findings do not appear to have been arrived at on analysis of the materials on record, the impugned order in that regard cannot be sustained and is liable to be set aside and matter remanded to the Commissioner (Appeals) to decide afresh after hearing the parties and after going through the entire records placed before it in that regard. 36. In Maris Spinners Ltd. (supra) the Tribunal had held that the light fittings and parts thereof used inside the manufacturing hall of the factory for providing magnifying industrial lighting system which was essential for manufacturing process were held as the capital goods and hence entitled to credit accordingly. The said decision was upheld by the Madras High Court while observing that when the Supreme Court had enunciated the law by bringing lighting fittings and cables within the ambit of capital goods under Rule 57Q of erstwhile Central Excise Rules, the order of the Tribunal could not be held to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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