Judgment:
1. The captioned two appeals were heard together as the issue involved in these appeals is the same and are being disposed of by this common order.
2. The facts of the cases in brief are that the appellants are engaged in the manufacture of V.P. Sugar and Molasses. They procured pipes and tubes from the market which they used in the plant for carrying juice from the cane juice tank to other parts of the plant for the manufacture of sugar. The appellants also used Asbestos packing, Compressed Asbestos, Asbestos packing yarn for jointing the parts of machines etc. The department alleged that these items were not capital goods, therefore, disallowed them Modvat credit on these items. The appellants, in reply to the show cause notice submitted that these items are parts of the plant inasmuch as pipes and tubes are used for carrying cane juice and Asbestos packings, Compressed Asbestos Fibre and Asbestos Packing Yarn are used for jointing the parts of tubes, pipes etc. and were used in the manufacture of sugar. The lower authorities after hearing the submissions made, disallowed Modvat credit to the appellants and also imposed penalty. Against this order, the appellants have filed these two appeals.
3. Shri Bipin Garg, learned Advocate appearing for the appellants submits that the pipes and tubes are integral part of the sugar plant inasmuch as they are used for carrying cane juice from one part of the plant to other part for the manufacture of sugar. He submits that thus these pipes and tubes are capital goods and are used in the process of manufacture of sugar and therefore Modvat credit my be allowed to them.
4. The other items on which Modvat credit was disallowed were Asbestos fibre, Asbestos packing and Asbestos packing yarn. The learned Counsel submits that Asbestos packing, Asbestos fibre and Asbestos packing yarn are used for making the pipes and tubes leak proof. He submits that these items themselves being part of the plant are eligible for Modvat credit and prays that Modvat credit may be allowed. The learned Counsel also submits that the lower authorities have imposed the penalties in the two cases. He submits that since the items used by them were capital goods and Modvat credit was admissible to them on these items, therefore, imposition of penalty is not warranted and the same may also be set aside and pre-deposit of duty and penalty may be waived.
5. Opposing the request for dispensing the pre-deposit of duty and penalty, Shri A.M. Tilak, learned JDR submits that Asbestos packing, Asbestos Fibre and Asbestos Yarn cannot be treated as parts of plant, since they were in nature of material used preventing leakage in the pipes and tubes, they are not in the nature of parts of tubes and pipes or in the nature of parts of plant.
6. On the question of steel tubes and pipes, the learned JDR submits that the lower authorities have rightly denied the benefit of Modvat credit on them.
7. Heard the submissions of both sides. I find that the issue is a simple one, therefore, with the consent of both the sides, it was decided to hear the appeals itself by dispensing with the pre-deposit of duty and penalty.
8. On careful consideration of the submissions made, I find that there is force in the argument of the learned Counsel for the appellants insofar as the pipes and tubes are concerned. Pipes and tubes are undoubtedly a part of the plant inasmuch as they are used for carrying cane juice from one part of the plant to the other part of the plant of sugar.
9. Insofar as Asbestos packing, Asbestos Fibre and Asbestos packing yarn are concerned, I am not convinced with the arguments of the learned Advocate for the appellants. It cannot be treated as pipes nor it can be treated as part of the plant, it is basically a material used only for making pipes and tubes leak proof. It cannot be treated even an integral part of the plant and machinery. Since these items are not parts of either plant or the pipes and tubes, I hold that the lower authorities have rightly denied Modvat credit on these items. I have examined the quantum of penalty. I find that this is nominal amount, therefore, I do not see any reason to interfere with the quantum of penalty. In the result, these two appeals are disposed of in the above terms. The impugned order, is therefore, modified to the extent stated above.