1. Modvat credit of Rs. 27,702/- has been disallowed on (1) cement, (2) Acquat, Formulation, Biosite (Chemical items) and (3) H.S.S.Hand tap on the ground that these are not capital goods under Rule 57Q of the Central Excise Rules. In addition, a penalty of Rs. 5000/- has been imposed. The period of dispute is May & June, 1996.
2. I have heard Shri V.K. Jain, ld. C.A. for the appellants and Shri Uma Shankar, SDR for the Revenue and record my findings herein below:- Cement is used in civil construction work for laying foundation for setting up machines. In the assessees' own case (Order No.C.II/1384-90/WZB/2003 dated 13.6.03) capital goods credit has been extended to cement following the ratio of the decision of the Supreme Court in the case of Jawahar Mills Ltd. [2001 (132) ELT 3 (S.C.) upholding the Tribunal's decision in which it was held that the definition of capital goods in Rule 57Q is very wide. The contention of the ld. SDR that building material used as raw material for construction of plant cannot be said to be use as plant in the manufacture of goods, so as to qualify under Section 8(3)(b) of the Central Sales Tax Act, 1956, relying upon paragraph 20 of the Larger Bench decision in the case of Jawahar Mills. Ltd., is required to be rejected, as in paragraph 29, the Larger Bench has categorically held that the expression employed in Rule 57Q is even wider than the expression contained in Section 8(3)(b) of the Central Sales Tax Act.
Following the ratio of the Tribunal's order in the assessee's own case cited supra, I hold that the credit is admissible on cement.
3. Chemical items are used for water treatment that is in the water distribution system of the sponge iron plant. From the kiln, sponge iron at the temperature of around 800 degree C. is discharge to the Rotary Cooler where the temperature is brought down by cooling into water as, at that high temperature, sponge iron cannot be exposed to the atmosphere since it will absorb the atmospheric moisture and will lose its magnetic properties. Therefore, although these items may not qualify as capital goods under Rule 57Q, they will qualify as inputs under the provisions of Rule 57A of the Central Excise Rules and are hence eligible to modvat credit.
4. H.S.S.hand tap is a tool of Lathe Machine which is used for cutting excess metal for manufacture of nuts, bolts, washer, keys etc. for onward use in the machinery of the sponge iron plant. In the light of the Tribunals' decision in the assessee's own case cited supra, wherein the credit was held to be admissible to H.S.S.drill used in the Lathe machines, I hold that credit is admissible on this item. The reliance placed by the ld.D.R. in the case of Usha Ispat Ltd. [2000(125) ELT 1184] in which it has been held that in the entire scheme of manufacture of pig iron by M/s. Usha Ispat there is no warrant or requirement for Lathe machines, is misplaced as the appellants herein are using the Lathe machines for the purpose set out above.
5. In the result, I hold that the appellants are entitled to credit on cement, H.S.S.Hand tap under the provisions of Rule 57Q and on chemical formulations under the provisions of Rule 57A of the Central Excise Rules, 1944, set aside the impugned order and allow the appeal.