Judgment:
1. The facts leading to the present appeal are that the appellants are engaged in the manufacture of cement. Consequent to the introduction of Modvat for the capital goods, the appellants filed a declaration in terms of Rule 57T and took Modvat credit of duty paid on capital goods.
The department alleged that on certain items the Modvat credit of duty as capital goods was not admissible and accordingly denied the benefit of Modvat credit on these items. Against this decision of the Collector, the appellants have filed the present appeal. The Collector disallowed the Modvat credit on specified goods as switches/starter/power transducer, spares for MOCB, cables, aluminium coil, chain pully, locking ring, speed controller, conveyor belt, level controller, thermo-couple, scrap roller and filter bags. The appellants grouped all the products in the following 4 categories :- (a) Items used in conveyor system like conveyor belt, switches, starter, power transducer.
(b) Control equipments like switches, starter, power transducer, speed controller and level controller.
2. Shri R. Nambirajan, learned Advocate along with Shri M.P. Devnath, learned Advocate appearing for the appellants submits that insofar as denial of Modvat credit in regard to the invoices raised during February, 1994 as well as on certain invoices where the name of the appellants is not mentioned and where the total amount of Modvat credit is Rs. 1,31,460.45, he is not pressing the issue and contesting the denial of credit. The ld. Counsel submits that he is not contesting the denial of Modvat credit amounting to Rs. 3,68,743.67 in respect of items of steel like angles, channels, flats etc. He submits that he wants to confine his arguments only to denial of Modvat credit amounting to Rs. 7,04,553.47 in respect of items mentioned above. The ld. Counsel submits that insofar as Modvat credit on conveyor system like conveyor belt, switches, starter, power transducer is concerned, his case was fully covered by the decision of this Tribunal in the case of Kalinga Cement Ltd. and Shiva Cement Ltd. (Final Order No. S/96-97 and A/138-39/CAL/95, dated 8-3-1996), Tribunal in Para 4 of the Reference Order had held as under :- "I also reproduce below the finding of the Tribunal given in Para 5 of the said order dated 8-3-1996 :- "I am inclined to agree with the submissions of the learned Consultant for the Respondents that a plant is also entitled to the benefit of Modvat credit under Rule 57Q. It is admitted that the cement plant of the Respondents is manufacturing cement which is a specified final product. It is also admitted by the appellants that conveyor belts are used in the cement plant. On the plain reading of the Clause (a) and (b) of Rule 57Q, there is, therefore, no doubt that conveyor belts would be entitled to the benefit of Modvat credit. Accordingly, I do not see any substance in the Appeals of the Revenue and they are dismissed as such. Consequently, the Stay Petitions are also dismissed"." 3. The learned Counsel submits that insofar as control equipments like switches, starters, power transducer, speed controller and level controller are concerned, these equipments are required for efficient running of the machine and plant. He submits that Explanation (a) and (b) cover these items.
4. Insofar as Electrical items like cables, switches, starters etc. are concerned, the learned Counsel submits that all the items falling under Chapter 85 were brought in the Explanation for admissibility of Modvat credit on capital goods with effect from 1-3-1997. He submits that if they happened to be capital goods or accessories or parts with effect from 1-3-1997, they do not cease to be so before that date. In support of this contention, he cites and relies upon the decision of this Tribunal in the case of Nav Bharat Paper Mills [1996 (86) E.L.T. 501] and in the case of Nova Udyog Ltd. [1996 (88) E.L.T. 532].
5. In regard to the parts of Pollution Control Equipments, the Apex Court in the case of IFFCO [1996 (86) E.L.T. 177] had held that the Pollution Control Equipment is a part of plant and machinery and, therefore, the use of Ammonia for the operation of the plant and machinery was exempt. The ld. Counsel submits that the Pollution Control Equipment is specifically covered from 16-3-1995. He submits that all the products as mentioned above are thus covered by one or the other decision of this Tribunal or the Supreme Court, and, therefore, prays that the appeal may be allowed.
6. Shri Jangir Singh, learned JDR appearing for the department submits that the findings of the Collector are specific on each product and its use in the entire plant and machinery. He submits that since these items were not specifically covered as capital goods during the material period, therefore, the lower authorities have rightly denied them the Modvat credit. He reiterates the findings of the Collector as adjudicating officer.
7. Heard the submissions of both sides. We find that conveyor system like conveyor belt is a material handling system. We also note that Hon'ble Patna High Court in case of TISCO had held that EOT crane which is a material handling equipment is a production or processing equipment. We note that it is material handling equipment, therefore, it is a part of plant and machinery which is used in the process of bringing about a change. We also find that East Regional Bench of this Tribunal had held similar view on admissibility of Modvat credit on conveyor belt system.
8. Insofar as control equipments like switches, starters, speed controller, level controller, etc. are concerned, we note that with the advancement of technology, these equipments are essential tools for efficient functioning of the machinery and plant as well as these items can be treated as equipment or parts essential for efficient running of the plant and machinery and thus can be treated as capital goods for the purpose Rule 57Q.9. Electrical Items like Cables etc. are covered by Chapter 85. The correct chapter heading will be 85.44. With effect from 1-3-1997, this item has already been included as eligible for Modvat credit as parts of plant and machinery. Since the item has now been included as item eligible for Modvat credit as capital goods, there is no reason to hold that it is not to be a capital goods during the material period. We note that following the ratio of the decision of this Tribunal in the case of Nova Udyog Ltd. and in the case of Nav Bharat Paper Mills we hold that Electrical Cable is an item admissible for Modvat credit as capital goods.
10. Parts of Pollution Control Equipment are essential for the plant and machinery in the present day thinking on pollution control. The Apex Court in the case of IFFCO had held that the Pollution Control Equipment is a part of plant and machinery used in the manufacture of fertiliser and further held that Ammonia gas used in this process is also eligible for the benefit of exemption notification. Here, though we are not concerned with the exemption part, we are concerned with Pollution Control Equipment as part of plant and machinery and since the Pollution Control Equipment is an essential requirement being part of the plant and machinery, shall be admissible to the benefit of Modvat credit as capital goods.
11. In view of the above findings, the appellants shall be entitled to the Modvat credit of Rs. 7,04,553.47.
12. The impugned order is, therefore modified to the extent stated as above and the appeal is disposed of accordingly. Cross-objections are also disposed of in the above terms.