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TMI Blog2019 (3) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... the CESTAT was justified in holding that though the Chapter Heading 8431 is excluded in Sr.No.2 of the Table to Rule 57 Q (1) of the Central Excise Rules, 1944, parts of Conveyer is covered under Sr.No.5 of the Table? (c) Whether the CESTAT was justified in relying upon the Circular No.276/110/96-TRU dated 02.12.1996 to hold that for the purpose of parts, Chapter Heading is immaterial?" The respondent waives service. Filing of paper-book is dispensed with. By Consent heard forthwith. 4. Mr. Jetly appearing on behalf of the Revenue would submit that the Tribunal has completely misconstrued and misapplied the relevant legal provision. The legal provision has not been fully understood and what has been done is to ignore its plain language. After inviting our attention to the legal provision, it is submitted that the demand was raised by issuing a show cause notice. The demand was raised on the footing that certain goods, though styled and termed as capital goods insofar as the Cenvat Credit is concerned, not all of them are covered. With reference to the specific tariff entry, exceptions are carved out and such exceptions would therefore disable the respondent/assessee from claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57Q stood thus :- "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 (e) 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 14; and (ii) all goods falling under heading Nos.36.05 or 37.06 (iii) ingots and billets of non-alloy steel falling under sub-heading Nos.7206.90 and 7207.90 manufactured in an induction furnace unit, whether or not any other goods are produced in such induction furnace and hot re-rolled products of non-alloy steel falling under subheadin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in such capital goods were received in the factory before the 1st day of march, 1997 (6) A manufacturer shall be allowed credit of specified duty paid on capital goods manufactured by him for the manufacture of final products in his factory. (7) The credit of the specified duty on capital goods [other than those ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, spares and accessories of the specified goods against Sr.Nos. 1 to 4 above are concerned, they would qualify as well according to the Tribunal. 18. The Tribunal found that the assessee before us claimed Modvat Credit in respect of goods falling under chapter 8424 parts of conveyor falling under chapter 8431 and accessories of spraying and guns hoses falling under chapter 8424 and articles of Alloy and steel falling under chapter 7326. Thus, Modvat Credit was disallowed on the ground that goods under Chapter Heading 8424 and 8431 were excluded from the definition of the "capital goods". 19. Insofar as that aspect is concerned, the stand of the Revenue was that the Sr.No.2 of the Table may begin with the words, "all goods falling under Chapter 84", but in the bracket, excluded goods are specified. If the excluded goods are covering the whole of the Chapter 8431, 8424 and 7326, then, the goods falling under chapter 8424 and 8431 were excluded. 20. The assessee argued that the only exclusion provided in the definition of "capital goods" is in respect of the fire extinguisher falling under chapter 8424.80 and for items other than this extinguisher falling under chapter 842 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised, however, with regard to parts of conveyor and that are classifiable under Chapter Heading 8431 and the conveyor is classifiable under Chapter Heading 8424. The Tribunal found that the Table included all goods falling under Chapter 4 other than those clearly specified and at the relevant time, the excluded category did not include the Chapter Heading 8431. 27. To our mind, the entire excluded category should have been considered. At the relevant time, the sub-heading No.84.15, 85.18, 8422.10, 8424.10, fire extinguisher falling under subheading No.8424.80, 8424.91, 8424.99. 84.29 to 84.37, the expansion valves and solenoid valves under sub-heading 8481.10 of a kind used for refrigerating and airconditioning machinery are excluded. Thus, all goods under chapter 84 other than internal combustion engines falling under heading No.84.07 or 84.08 and of a kind used in motor vehicles, compressors falling under heading No.84.14 and of a kind used in refrigerating and airconditioning appliances and machinery, heading or subheading Nos.84.15, 85.18, 8422.10, 8424.10 and fire extinguishers falling under sub-heading referred above, 84.28 to 84.37 etc. and expansion valves and solenoid val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen credit was available on components, spares and accessories of the specified capital goods irrespective of their classification. 4. Accordingly, it is clarified that all parts, components, accessories, which are to be used with capital goods of clauses (a) to (c) of Explanation (1) of rule 57Q and classifiable under any Chapter heading are eligible for availment of Modvat Credit. 5. Trade and Field formations may be informed accordingly. 6. The receipt of the Circular may please be acknowledged. [Source : M.F.(D.R.) Circular No.276/110/96-TRU dated 2-12- 1996]" 30. A bare perusal of this Circular would indicate that with effect from 23rd July, 1996, capital goods eligible for credit under Rule 57Q have been specified either by their classification or by their description. There is an explanation which is also referred and it is stated that there is a separate entry for components, spares and accessories and no reference has been made about their classification. As such, scope of this entry is not restricted only to the components, spares and accessories falling under Chapters 82,84, 85 or 90 but covers all components, spares and accessories of the specified goods irrespectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcluded category, then, to that extent, the Tribunal may be right. However, when it was aware that the Table at Sr.No.2 clearly read as excluding goods falling under Heading 84.29 to 84.37, then, it should have also excluded the parts, accessories of these goods from the availment of Modvat Credit. We find that the reading of the Sr.No.5 by the Tribunal was improper and correct. The Circular would not enable the assessee in this case to avail of the credit. Though the Circular may say that the scope of this entry is not restricted to the components, spares and used under Chapters 82, 84, 85 or 90 but covers all components, spares and accessories of the specified goods irrespective of their classification, then, to that extent and without noticing the language of Table No.5, and only with the aid of this Circular, the Tribunal could not have allowed the assessee to avail the Modvat Credit. 34. In the light of the fact that we have analysed the entry totally and interpreted it also in the light of the Circular, then, we do not think that the ultimate conclusion of the Tribunal should be entirely set aside. It is set aside only to the extent indicated by us and pertaining to the good ..... X X X X Extracts X X X X X X X X Extracts X X X X
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