Full Judgment
2. Ld. Counsel stated that the appellants are engaged in the manufacture of PVC Sheeting and Flooring falling under Chapter 39 of the Central Excise Tariff Act, 1985.
3. In the course of manufacture of these items they are required to use "Green dot variable Transformer Type" and "Statics Convertor Panel".
The former is used for regulating input of A.C. Voltage which in turn controls the speed of the machine. Such control is essential because without it the machine may perform at different speeds which may effect the quality or even characteristics of the final product; And the Statics Convertor Panel is used for thyristorised speed control and protection of D.C. Motors driving the calendering line and each function is monitored/controlled by the said panel and without it, it is impossible to run the calendering machine.
4. The A.C. has not questioned these facts but has denied the benefit of Modvat on the ground that they could not be considered as capital goods as they have not been used for the purposes mentioned in sub-clauses (a), (b) and (c) of [Rule] 57Q.5. The A.C. has also further taken the stand that these items are classifiable under sub-heading 85.04 and this heading has been included in the definition of capital goods under Rule 57Q w.e.f. 16-3-1995 only where the claim pertains to the period prior to this date.
6. It was the appellants contention that while it is true that the heading under which these goods are classifiable have been included under [Rule] 57Q only w.e.f. 16-3-1995 at the same time the notification including them has been considered as only clarificatory in nature and given retrospective effect by the Tribunal in the case of J.K. Synthetics Ltd. v. CCE, Jaipur 1996 (17) RLT 98-NB].
7. It was his contention that even otherwise the nature and function of these items is such that they would be covered by the definition given in 57Q(1)(a) since they were essential for operating the machines utilised in the manufacture of their final product.
8. Ld. DR drew attention to the Order-in-Original and Order-in-Appeal and reiterated the Department's view point contained therein.
9. I have considered the above submissions. I observe that Ld.
Counsel's contentions have strong force. The Departmental authorities have themselves accepted that these machines are used in the factory.
The Transformer is used for regulating the input of the A.C. Voltage which in turn controls the speed of the machine and the statics convertor panel is also used for speed control and protection of D.C.Motor driving the calendering machine. The calendering machine is undisputably utilised in the manufacture of the final product. In the circumstances they are obviously required to be considered as capital goods in terms of Rule 57Q. The fact that the heading in which they were classifiable was included under 57Q(d) only by virtue of a notification dated 16-3-1995 only shows that whatever was implicit has been made explicit with this inclusion. This notification has also been considered as clarificatory and given retrospective effect in the Tribunal's order in the case of J.K. Synthetics (supra) cited by the Ld. Counsel. Therefore, whichever way we may look at it the goods are required to be treated as capital goods and therefore entitled to the benefit claimed by the appellants. The impugned orders are therefore set aside and the appeal is accepted.