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TMI Blog2000 (11) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not used in the process of manufacture and, therefore, do not constitute capital goods for the purpose of Rule 57Q of the Central Excise Rules, as it stood in the year 1994. Though the Commissioner had allowed the appeal of the assessee, the Tribunal restored the order of the assessing authority denying the Modvat credit. The manufacturer-assessee has, therefore brought this reference before us. 3.The Modvat scheme was introduced in the Excise Law in the year 1986. It was initially confined to the inputs used in the manufacture of the specified excisable final products, till the year 1994. The goods which were excluded from that category of inputs by and large were allowed Modvat credit in 1994 by extending the scheme to capital goods, which were till then ineligible for Modvat credit. The excisable goods used as inputs under Rule 57Q which occurs in Chapter AAAA. Credit of duty paid on capital goods used by the manufacturer of specified goods, was introduced in the year 1994. The object of the Rule is to allow credit of specified duty paid on the capital goods used by the manufacturer in his factory, and for utilising the credit so allowed towards payment of duty of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork cannot go on in the factory as workmen would be unable to continue to be present in the factory premises and continue to work on the machines which are used in a process which results in the generation of the noxious gas. Such blowers are necessary to protect the health and safety of the workmen. 5.The requirement in the definition which is an exhaustive definition that the "capital goods" referred to in the definition, be used for producing or processing or for bringing about any change in any substance for the manufacture of the final product, it was submitted, is satisfied, as the cables are used for running the blowers without which the process of production cannot continue. The words used for producing or processing, it was submitted, does not imply that the user must be direct, and that it cannot be indirect. Wires and cables required for bringing the electrical power to run the machinery and apparatus and appliances which are used in the production or processing is also used for producing or processing the goods, as in the absence of such cables, power cannot be supplied to the machines and appliances and without the aid of power, those machines and appliances cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd is to be judged by the company it keeps. Counsel relied on that principle to contend that the word "plant" must like all other items used in the definition clause in Sub Clause (a) must be taken to refer to things which are used in the manufacture of the goods. Counsel submitted that machines cannot run by themselves and the prime mover required for running the machine is the electrical energy which must necessarily be brought to the place where the machines are kept, and that the wires and cables required for bringing that energy are essential for the process of manufacture and would fall within the scope of the term "plant". 10.Mr. V.T. Gopalan, Learned Additional Solicitor General appearing for the Revenue submitted that in Economic Legislation the court is only required to consider the legislative intent as disclosed in the Legislation under consideration, and considerations of equity removal of inconsistency cannot come in the way of the legislative intent being effectuated. It was submitted that the fact that the Rule was subsequently amended would only indicate that until such amendment, the benefit subsequently given could not have been claimed prior to the amendment. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a term of wide import by itself, held that such a wide meaning cannot be assigned to the word "plant" ignoring the context in which the term had been employed, and the purpose of the statute in which that provision is found. Having regard to the language of the Rule made under the Sales Tax Act which was under consideration in that case, the Court held that, that word was not used in it's wider sense and did not include within it's meaning land, building and machinery. It held that the crates and bottles used for storing the beverages manufactured by the respondent before it could not be regarded as plant. 13.Reliance was also placed on the recent decision of the Supreme Court in the case of C.I.T., Trivandrum v. Anand Theatres [(2000) 5 S.C.C. 393], wherein, the court inter alia observed that the meaning to be assigned to the word "plant" in the context of the scheme of Section 32 of the Income-tax Act was not to be dependant upon the meaning given in other judgments in relation to the term in other contexts. The court quoted with approval the observations of the Court in the case of Deputy Chief Controller of Imports and Exports v. K.T. Kosalram [(1970) 3 SCC 82]. The passage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded as capital goods - things which are movables - that are covered by Rule 57Q when such movables are capital goods. Capital goods in the context of Modvat scheme are necessarily excisable goods and are themselves the result of manufacture. 16.The term "manufacture" has been defined in Section 2(f) of the Central Excise Act. That definition is an inclusive definition. That definition reads as under: "manufacture" includes any process, - (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture. and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account." 17.The reference to manufacture in Rule 57Q of the Rules has thus to be understood with the meaning assigned to it in Section 2(f). That definition is not an exhaustive one, it is an inclusive one, and takes within it's scope things wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1963 S.C. 791, wherein, the constitution Bench of the court in paragraph 14 of the judgment observed : "The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely to produce some change in a substance, however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passages reads thus :- Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." 22.In paragraph 18 of the judgment, the Court referred to the definition of "manufacture" in Section 2(f) of the Excise Act, and observed : "The definition of "manufacture" as in Section 2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be regarded as capital goods. 26.The fact that wires and cables have not been specifically mentioned in Clause (a) or (b) or (c) does not on that score alone imply that it was meant to be excluded. If they can be regarded as forming part of any of the categories referred to in one or the other clauses, they are still capable of being treated as capital goods. 27.It is also necessary to keep in view the fact that this case arose in the early years of the introduction of the Modvat scheme for capital goods when there was uncertainty in the minds of all concerned as to the precise scope of the coverage. The fact that by subsequent amendments, it has been made clear that wires and cables were not meant to be excluded from the category of capital goods, would only mean that an ambiguity which existed earlier was subsequently clarified. It does not mean as was contended for the Revenue, that a concession which was not available earlier was extended for the first time by the subsequent amendment. 28.Whenever the legislature or the Rule making authority employs words of general import, certain degree of ambiguity is inevitably associated with the term so employed. The fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end-product is part and parcel of the manufacturing process of that end-product". The observations of the Court with regard to the concern for environment and pollution control apply with even greater force to preservation of the health and safety of the workmen employed in a process which generates noxious gas from which the workmen need to be protected, and which gas is required to be removed simultaneously with the production of that gas for protecting the health and safety of the workmen. The blowers used for removing that gas and the wires and cables required to make that blower operational must, therefore, be regarded as forming part of the manufacturing process and used in that process. 31.We, therefore, answer the question referred to us at the instance of the assessee as to whether the Tribunal was correct in holding that the wires and cables are not capital goods as defined in Rule 57Q of the Central Excise Rules, in favour of the assessee, and against the Revenue. We hold that the wires and cables and covered by para 1(a) of the Explanation to Rule 57Q. So far as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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