Full Judgment
2. The party filed an appeal and Commissioner (Appeals) vide his order dated 18.5.99 allowed the appeal of the party in respect of all the terms by setting aside the order passed by the original authorities.
3. The Revenue are in appeal against the above order of Commissioner (Appeals). I have heard Shri Swatantra Kumar, JDR for the Revenue and Shri G.S.Bhangoo, Advocate for the respondent. It is contended that the goods under consideration do not qualify to be considered as capital goods from their functional use in terms of Clause (a) to (c) of Rule 57Q of the Rules, having no direct nexus to manufacturing stream in the factory. It is contended that meaning of the 'capital goods' as per Rule 57Q during the relevant period is restrictive and not exhaustive.
The words used in the Explanation are 'in the manufacture of .....and not or in relation to the manufacture of' which suggests that capital goods or these accessories should have direct role in manufacturing process. I have considered these submissions. It is observed in the Larger Bench decision of the CEGAT in the case of Commissioner of Central Excise, Indore Vs. Surya Roshni Ltd., reported in 2001 (128) E.L.T. 293 (Tri.-LB) that the definition of capital goods under Rule 57Q can be machines, machinery, plant, equipment, apparatus, tools or appliances. Whatever be the category to which the goods belong; (1) they must be used for producing the final product; (2) must be used for processing of any goods for the manufacture of final product or (3) used for bringing about any change in any substance for the manufacture of final product. Thus, it is clear that any machine, machinery, plant, equipment, apparatus, tool,s or appliances if satisfy any one or more of the three conditions mentioned therein, such "capital goods" will be entitled to MODVAT credit. Not only the complete machines, machinery, plant, equipment, apparatus, tools or appliances falling under clause (a), their components, spare parts and accessories are also to be treated as Capital goods entitled to Modvat credit. The only condition that is to be satisfied for clause (b) to come into play is that components, spare parts and accessories must be of machines, machinery, plant, equipment, apparatus, tools or appliances used on one of the functions mentioned in clause (a). Over and above the above mentioned two categories falling under clauses (a) and (b), moulds and dies, generating sets and weigh bridges used in the factory of the manufacture will also be entitled to MODVAT credit as "capital goods".
Those capital goods mentioned in clause (c) need not be used for producing the final products or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final products.
4. The only ground on which the Department is contesting the finding of the lower Appellate authority is that the goods under consideration do no have direct role in manufacturing process. From the above analysis in the order of Larger Bench of the CEGAT, it is observed that the definition does not require the use of the capital goods in the direct manufacturing process of the end products. Therefore, the contention of the Revenue in their appeal is misconceived. However, at the relevant time, the item Speco Lube used as lubricant did not fall within the definition of capital goods. The lubricants even otherwise, also are not machines, machinery or component or spare parts etc. Therefore, the MODVAT credit on this item under Rule 57Q is not admissible.
5. In the result, but the for the item Speco Lube, the appeal of the Revenue is not maintainable and the same is rejected.