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TMI Blog2015 (5) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... ds' which are used in manufacturing process. - credit admissible on 'capital goods' and therefore, we are confining ourselves with the relevant provisions contained in Rule 57Q to 57U, as stood in 1999. As per own admission of appellant, these 'Electrodes' are used for welding of machines and machine parts which form part of repair work. If there is no damage in machine or no welding is required, "Welding Electrodes" would not be used at all. Meaning thereby, it fails the test of being a constituent of machine etc. or the manufacturing process of finished goods. It thus cannot be said that "Welding Electrodes" form constituent of plant and machinery. One user mentioned is hardening of surface of mill rollers, trash plates, scrappers so that smooth crushing of cane can be carried out. Meaning thereby, that though machines are otherwise workable for the purpose of manufacture of sugar, for smooth functioning, "Welding Electrodes" are used to form a layer over the surface of mill rollers etc. to harden it. It does not mean that without user of 'Electrodes', the machines are unworkable. "Welding Electrodes" do not constitute an integral part necessary to the constitution of whole artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember, 1999, stating that aforesaid items are not included as 'capital goods' in the table appended to Rule 57Q of Central Excise Rules, 1944 (hereinafter referred to as 'Rules, 1944), hence, credit has been availed in violation of Rule 57Q. Appellant was required to show cause, why credit already availed be not disallowed and recovered under Rule 57U of Rules, 1944 read with Section 11A of Act, 1944. 6. Appellant submitted reply, claiming that it has validly availed credit but Deputy Commissioner, Custom and Central Excise, Division Moradabad rejected explanation and disallowed MODVAT/CENVAT Credit for aforesaid period. Aggrieved thereto, appellant preferred an appeal before Commissioner, Central Excise (Appeals), Ghaziabad (hereinafter referrred to as 'CCE(A)'). The appeal came to be dismissed vide order dated 13.10.2003. Thereagainst, Second Appeal preferred before CESTAT, which has been rejected by order dated 14.10.2004. 7. Tribunal has dismissed appeal for MODVAT/CENVAT Credit in respect to "Welding Electrodes" and "Steel Flat Bars", but has allowed the same in regard to "Winding Wires". Appellant has confined this appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood in 1999. 13. All these three Chapters i.e. AA, AAA and AAAA were substituted by Notification No. 6/97-C.E.(N.T.), dated 01.03.1997. Rule 57Q, inserted by notification dated 01.03.1997 as amended in February, 1999, reads as under: "RULE 57Q. Applicability.- (1) The provisions of this section shall apply to goods (hereafter in this section, referred to as the "final products") described in column (3) of the Table given below and to the goods (hereafter, in this section referred to as "capital goods"), described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final products. TABLE S. No. Description of capital goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer Description of final products 1 2 3 1 All goods falling under heading Nos. 82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :- (i) all goods falling under Chapter 24; and (ii) all goods falling under heading Nos. 36.05 or 37.06. [(iii) ingots and billets of non-allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal products shall be allowed credit of additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) on goods falling under Chapter heading No. 98.01 of the first schedule to the said Customs Tariff Act, to the extent of 75% of the said additional duty paid on such goods. (4) A manufacturer of the final products purchasing capital goods from a unit situated in a Free Trade Zone or from a hundred per cent export-oriented undertaking or from a unit in an Electronic Hardware Technology Park or Software Technology Parks and using them in the manufacture of final products, shall be allowed to take the credit of the specified duty paid on such capital goods only to the extent of duty which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 (51 of 1975), equivalent to the duty of excise paid on such capital goods. (5) The credit of the specified duty on capital goods (other than those capital goods in respect of which credit of duty was allowable under any other rule or notification prior to the 1st day of March, 1997) shall not be allowed if such capital goods were received in the factory before the 1st day o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for claiming MODVAT credit. It is however, then contended that under Rule 57Q(1), items mentioned in column 5 of the table, are certain goods which are within ambit of allowing credit, irrespective of heading of Chapters of Central Excise Tariff Act. The only requirement in respect to the items mentioned at serial no. 5 in table under Rule 57Q (1), is that they must qualify to be either as 'components', 'spares' and 'assessories' of the specified goods under serial no. 1 to 4, then those items shall also be admitted for allowing 'credit'. It is further contended that "Welding Electrodes" would be covered by the term 'components' for the reason that it is used in the process of manufacturing sugar, therefore, is entitled to claim MODVAT credit. 18. Learned counsel for appellant drew our attention to annexure no. 9 to the paper book, where usuages of 'electrodes' in sugar factory have been explained. It is said that 'electrodes' in general are used to harden the surface of mill rollers at different intervals, so that smooth crushing of cane can be carried out. The said items are also used with sugar mills machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We may notice at this stage that sofar as Tribunal is concerned, it has rejected even this argument, observing that 'Welding Electrodes' does not fall within term 'component' of goods specified at serial nos. 1 to 4. 22. In M/s Star Paper Mills Ltd. Vs. Collector of Central Excise, Meerut [1989 (4) SCC 724], Court has considered meaning of 'component parts' contained in exemplar notification dated 4th June, 1979, modified by notification dated 28th February, 1982. In absence of any definition otherwise, the Court referred to dictionary meanings and said : "According to the Webster Comprehensive Dictionary, International Edition the word "component" inter alia means a constituent part." (emphasis added) 23. The term 'component' again was considered in Commissioner of Central Excise, Delhi Vs. M/s Allied Air-Conditioning Corporation (Regd.) (Judgment Today 2006 (09) SC 331]. Here the dictionary meaning of 'component', as referred in Star Paper Mills Ltd. (supra), was reproduced. 24. Both the aforesaid authorities were considered in a recent decision in Saraswati Sugar Mills Vs. Commissioner of Central Excise, Delhi [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;constituent part'. Further, 'constituent' means serving to form or compose as a necessary part'. In Advanced Law Lexicon, 3rd Edition 2005, (by P. Ramanatha Aiyar), the word 'component part' is defined as something which becomes an integral part of the goods in question by losing its physical and economic distinctiveness'. It defines 'constituent' (of a component) as that helps made up or complete a unit or a whole's one part of something that makes up a whole'. Encyclopaedic Law Lexicon, Volume 200809 Edition, by Justice C.K. Thakkar, describes the 'components' as : 'It appears, therefore, that for an article to be called a component part, it is not necessary that even it becomes part of another article, it should still retain its identity. All that is necessary to make an article, a component part is that it goes in to the composition of another article. If an article is an element in the composition of another article made out of it, such an article may well be described as a component part of another article. It may be that the final product made may be in the nature of a compound in which case, the elements forming compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constituent of plant and machinery. One user mentioned is hardening of surface of mill rollers, trash plates, scrappers so that smooth crushing of cane can be carried out. Meaning thereby, that though machines are otherwise workable for the purpose of manufacture of sugar, for smooth functioning, "Welding Electrodes" are used to form a layer over the surface of mill rollers etc. to harden it. It does not mean that without user of 'Electrodes', the machines are unworkable. Some times when regular use of machines having larger surface area, said surface becomes coarse, the 'Electrodes' are used to make surface hard and smooth, but, that is again a part of repair of the machines and it cannot be said that without user of 'Electrodes' these machines cannot be used, as such for the purpose of obtaining finished goods. These facts leave no manner of doubt in our mind and by no stretch of imagination it can be said that "Welding Electrodes" constitute an integral part necessary to the constitution of whole article and without which, article would not be complete, as observed by Apex Court in paragraph no. 13 of the judgment in Saraswati Sugar M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned in clause (a) used for the purposes enumerated therein would also be 'Capital goods' and qualify for Modvat credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the explanation is very liberal. " 32. Aforesaid judgment in our view, has no application in the case in hand. The decision relied by appellant in Collector of Central Excise Vs. Birla Jute Industries Ltd. (supra), infact has followed earlier decision in Collector Central Excise Vs. Jawahar Mills Ltd. (supra) and dismissed the appeal of Revenue, confirming decision of Tribunal in which "Welding Electrodes" were held 'inputs' to qualify for MODVAT credit, which is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that assessee was not entitled for any MODVAT credit for the reason that it did not use purchased machinery in its factory and therefore, necessary condition incorporated in Rules for availing credit of MODVAT was not complied with. To avail MODVAT credit, 'input' on which excise duty is paid must be used in manufacturing final products in the factory of assessee. The aforesaid decision also has no application to dispute in question. The issue up for consideration before this Court was not involved therein. Therefore, aforesaid judgment renders no assistance in the case in hand either way. 37. At this stage, counsel for appellant sought to place reliance on a reference order of Apex Court in Ramala Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise, Meerut [2010 (14) SCC 744], whereby Court has expressed doubt on the correctness of an earlier decision in Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi [2009 (9) SCC 139] and matter has been referred to larger bench. Having gone through the aforesaid decision we find that in Maruti Suzuki Ltd. (supra), question up for consideration was whether 'naptha' used in generating electricity for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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