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TMI Blog2005 (11) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... lubricants was denied by the Revenue inter alia on the ground that these machines used in workshop are not used in producing or processing of the final product. The claim of the assessee to avail modvat credit relates to the period ending prior to July 1996 under Rule 57 Q of the Central Excise Rules, 1944 as it stood at the relevant time. The Tribunal relying on its earlier decision in Jawahar Mills Limited Vs. CCE, Coimbatore, 1999 (108) ELT 47(T) in which the Tribunal has held that modvat credit in respect of control panel, cable, welding electrodes, etc. is allowable, accepted the contention of the assessee that articles in question are used in the factory of the assessee and is essential part for up-keeping and better functioning of the machines, therefore, they are eligible for modvat credit as capital goods within the meaning of Rule 57Q. The contentions raised before us are on the same lines. It would be apposite here to reproduce Rule 57Q to focus on the controversy in its fullness:- Rule 57Q. Applicability.- (1) The provisions of this section shall apply to finished excisable goods of the description specified in the Annexure below (hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectric generating sets (of output exceeding 75KVA) falling under headingNo.85.02; (vi) transformer (of power handling capacity exceeding 75 KVA) falling under heading No.85.04; (vii) Goods (other than for medical use) of heading No.90.22; (viii) goods (other than of a kind used for refrigerating and air conditions applications) falling under heading Nos. 84.81 and 90.32; (ix) components, spares and accessories of the goods specified against item (i) to (viii) above; (x) refractories falling within Chapter 69; (e) goods specified in the Table in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.68/89-Customs, dated the 1st March, 1989, and used in the factory of manufacturer] (2) specified duty means duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975). (2) Notwithstanding anything contained in sub-rule (1), no credit of the specified duty paid 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 16th day of March, 1995) shall be allowed if such capital goods were receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al condition, if it falls in any of the clauses (b), (c) and (d) the essential condition of direct involvement of the capital goods in the manufacture in process is not to be seen. In this conclusion, we are fortified by decision of the Supreme Court in Commissioner of C.Ex., Coimbatore Vs. Jawahar Mills Ltd. 2001(132) E.L.T.3 (SC) page 3. The articles which are subject matter before the Supreme Court were power cables, capacitors, control panels, cables distribution boards, switches and starters, air compressors and electric wire cables. We may notice here that the Supreme Court while considering the definition of capital goods under Rule 57Q, as it stood amended, was of the view that language used in the Explanation to define capital goods is liberal. It said :- 4. The aforesaid definition of 'Capital goods' is very wide. Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be 'Capital goods', and, therefore, qualify for availing Modvat credit. Per clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of ammonia provided such ammonia is used elsewhere in the manufacture of fertilisers. That the raw naphtha is used to make ammonia is unquestioned. The ammonia is used directly in the manufacture of fertilisers; the raw naphtha so used is, it is not disputed, eligible to the exemption. The question is whether the ammonia used in the off-site plants is also ammonia which is used elsewhere in the manufacture of fertilisers . The water treatment, steam generation and inert gas generation plants are part and parcel of the composite process that produces as its end product urea, which is a fertiliser. These off-site plants are part of the process of the manufacture of urea. There is no good reason why the exemption should be limited to the raw naphtha used for producing ammonia that is utilised directly in the urea plant. The exemption notification does not require that the ammonia should be used directly in the manufacture of fertilisers. It requires only that the ammonia should be used in the manufacture of fertilizers. The exemption notification must be so construed as to give due weigh to the liberal language it uses. The ammonia used in the water treatment, stea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing capital goods components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose have also been made eligible for availing modvat credit of the excise duty paid thereon. Obviously, the accessories in ordinary sense are not directly involved in the process of manufacture. It would be apposite to notice the meaning of accessories in the context which finds place in Explanation. In the Random House Dictionary the word accessory is defined as a subordinate or supplementary part, object, etc. used mainly for convenience, attractiveness, safety, etc. In legal terminology the Black's Law Dictionary explains the word accessory as anything which is joined to another thing as an ornament or to render it more perfect, or which accompanies it, or is connected with it as an incident, or as subordinate to it, or which belongs to or with it. It also means a thing of subordinate importance, aiding or contributing in secondary way or assisting in or contributing to as a subordinate. The Bombay High Court had an occasion to consider what is meant by accessories as a term used in the Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplementary and subordinate machinery are required to be kept at site. On admitted facts, the drilling machines, welding machines and lubricants were brought in factory for use in up-keep and maintenance of plant and machinery which are directly used in manufacture of excisable articles and the capital goods in question were certainly of subordinate necessity to such plant and machinery to the running of plant and is otherwise essential for its smooth and regular operations. Without proper up-keep and maintenance, the principal plant and machinery cannot function properly and the use of such capital goods is essential for smooth running of plant with greater efficiency. In other words, the goods in question are essential supplement to the plant and machinery for use in manufacturing goods, for its greater efficiency and better results and thus, it is an integral part of the process with which the primary machines are engaged. If we look from these aspects, the combined effect of the liberal view of the provision and the user of the machine as a supplementary or incidental to the main machines and except for the direct user, there is no impediment for the goods in question quali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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