1. This group of appeals arises from a common order of the Commissioner (Appeals). Tiruchirapalli dated 23.11.1998 partially allowing 3 appeals of the assessee, which were filed against 3 Orders-in-Original passed by the same Commissioner of Central Excise disallowing Modvat credit of Rs. 17,36,549.40 by O-I-O No. 74/97 dated 26.12.1997: Rs. 1,98,30,947.12 by O-I-O No. 71/97 dated 26.12.1997; and Rs. 1,94,69,054.71 by O-I-O No. 1/98 dated 02.01.1998.
2. The Excise Appeal Nos. 377, 378 and 379 of 1999 have been filed by the assessee feeling aggrieved by the impugned order to the extent that it goes against the assessee. By these appeals, the assessee has challenged the finding that the item nos. 1 to 8 and 20 mentioned in the 1st paragraph of the impugned order, which were used for RCC foundation for embedding machinery, were used in civil construction work and, therefore, they did not come within the meaning of 'capital goods', under Rule 57Q of the Central Excise Rules, 1944. The assessee also challenges the finding that 1,025 Dumpers and Static road rollers with accessories were being used in the mine and not within the factory of production, for the manufacture of final product, hence credit of duty was not admissible under Rule 57Q and that diesel engine driven welding set was used for maintenance purpose and hence was not capital goods for the purpose of Rule 57Q.3. The appellant-assessee had proposed to start their new project at Alathiyur for the manufacture of Cement falling under Chapter 25 of the Central Excise Tariff Act, 1985 and declarations were filed under Rule 57T of the Rules with an intention to avail Modvat credit on capital goods. The show-cause notice dated 11.04.1996 came to be issued for rejection of declaration and disallowance of Modvat credit in respect of certain goods on the ground that they were ineligible for claiming Modvat credit, as they did not qualify for it. Since Modvat credit was wrongly availed, show-cause notice was issued as to why the declarations should not be rejected under Rule 57O of the Rules read with 57T thereof and the amount of credit taken should not be disallowed.
5. According to the assessee, Cement and Steel items were used in the RCC foundation for embedding machinery, so that the machinery would work smoothly without any vibration, stress or strain. Some steel structures were also fabricated for mounting certain equipment and such activity was borne out by technical necessity. Steel items, such as angles, plates and channels and rods were required for putting up structures, which would hold the machinery in position. Items such as Cranes, Switch boards & Panels. Industrial valves, Digital weight indicator, Pre-heater cyclone ducts, Calciner and Kiln feed and Diesel engine driven welding set were capital goods and Modvat credit was admissible. It was also their case, that cables were used for providing interconnection to civil control systems in operating the various equipments used in the manufacture of cement and also for Pleasuring production parameters like temperature, pressure, vibrations etc.
Electrical wires and cables will be capital goods and, therefore, the assesee was entitled to clear the same and avail Modvat credit in respect thereof. It has been urged by the assessee in these appeals that the word 'Plant' would include not only the machinery and equipment for the production of any goods but also land, building and factory in which the goods are produced or manufactured. The civil work is an integral part of the project so that machines and machinery can be installed at various heights for proper functioning of the plant in the manufacture of cement. According to them, use of cement and steel had nexus with the manufacture of final product namely, cement.
Like-wise, steel items were also required for putting up structures, which will hold the machinery in position and whereafter only erection and installation would be complete. It is stated that the mines of the assessee were situated at Alathiyur factory and were adjacent to the factory as shown in the Registration Certificate and ground plan, by the Central Excise department. The mines were situated within the approved area of the factory and had to be considered as part of the approved factory premises. The assessee has therefore, contended that the dumpers and static road rollers which were used within the factory of production and duty was paid on them were eligible for Modvat credit. As regards diesel driven welding set, it is urged that, such equipment was used to set right machines and machineries, which were used in the factory to produce or process goods and, therefore, they were capital goods and being duty-paid eligible for Modvat credit. It is also pointed out that goods covered by Chapter Heading 85.15 include the welding set driven by diesel engine as an eligible item of capital goods with effect from 23.07.1996 vide Notification No. 14/96-CE(NT) dated 23.07.1996 and, therefore, such welding equipment, which was used in the factory was eligible for Modvat credit. It is submitted that the amendment to Explanation to Rule 57Q was clarificatory in nature. The assessee has placed reliance on the decision of the Tribunal in J.K.Synthetics Ltd. v. Commissioner of Central Excise reported in 1996 (88) E.LT. 786; Marvel Vinyls Ltd. v. Commissioner of Central Excise, Meerut ; Sri Sarvaraya Sugars Ltd. v.6. The Revenue has assailed in their Appeal Nos. 456 and 457 of 1999, the finding of the Commissioner (Appeals) holding that Micro Generating sets of the capacity of 5 KVA/10 KVA, Cables, Surface Miners (items 11, 12 and 13) were eligible for Modvat credit, being the items of capital goods used for the manufacture of the final product. It has been urged on behalf of the Revenue by the learned Authorised Representative for the department that the Micro Generating sets of the capacity of 5 KVA/10 KVA were on the face of it ineligible for Modvat credit because only electric generating sets of output exceeding 75 KVA falling under Heading 85.02, were included within the meaning of capital goods under Explanation (1)(2)(d)(v) of Rule 57Q(1) of the same Rules. She also submitted that the "cables" did not fall within the meaning of capital goods, as defined in the Explanation. As regards Surface Miner (item No. 13), it was argued that the said equipment was not used in the factory but was used in the mine. Even other items namely. Road rollers (item No. 10), Dumpers (item No. 18) and Diesel engine driven welding sets (item No. 19) were used in the mining area and not in the factory and, therefore, the assessee was not entitled to claim any Modvat credit. She has therefore, submitted that the demands confirmed against the assessees by the authorities below were fully justified.
7. Under Rule 57Q(1), as it operated during the relevant period, provisions were made for the purpose of allowing credit of specified duty-paid on the capital goods used by the manufacturer in his factory and for utilizing the credit so allowed towards the payment of duty of excise leviable on the final products or as the case may be on such capital goods, if such capital goods were permitted to be cleared under Rule 57S subject to the provisions of the Section and the conditions and restrictions as specified by the Central Government. For the purpose of Rule 57Q, 'capital goods' was defined and the expression included 'machines, machinery, plant, equipment, apparatus, tools or appliances for producing or processing of any goods or for bringing up any change in any substance for the manufacture of final products, as per Clause (a) of the Explanation 1, and the goods falling within the Schedule to the Tariff Act and used in the factory of the manufacturer as enumerated in Clause (d) which included goods falling under the Sub-Heading 85.15 Sub Clause (i) as well as Electrical Generating sets (of output exceeding 75 KVA) falling under Sub-Heading 85.02 (Sub Clause (v). It will be noticed that there is a reference of generating sets also in Clause (c) of Explanation 1 to Rule 57Q(1).
8. As regards items at S.No. 1 to 8 and 20 namely, Angles (1), Joists (2), Thermo Meeh Treated bars (3), Plain plates (4), Tor Steel (5), Rebar coils (6), Channel (7), Cement (8) and Steel wire (20), there is no dispute over the facts that these items were used for the RCC foundations for fixing the machinery so that machines may work without vibrations, stress or strain. Making the RCC foundation for the purpose, by use of these items was civil construction work, In other words, these items were used for construction of the foundations and, therefore, they were not "capital goods" within the meaning of Clause (1)(a) to Explanation 1 to Rule 57Q(1). In a similar context, where such items were being used for making up a foundation for a blast furnace, this Tribunal has in Malvika Steel Ltd. v. Collector of Central Excise, Allahabad , relying uponJ.K. Cotton, Spinning and Weaving Mills Co. Ltd. v. Sales Tax officer, Kanpur , held that cement and steel structures used in the erection of a blast furnace was a building material. Clause (a) of Explanation I lays down that machines, machinery, plant, equipment, apparatus, tools or appliances for producing or processing of any goods or for bringing about any change in any substance for the manufacture of a final products, are 'capital goods'. The word 'plant' occuring in this clause would derive its colour from the other items namely, machines, machinery, equipment, apparatus, tools or appliances for producing or processing of any goods or for bringing about any change in any substance for the manufacture of a final products. The word 'plant' occuring in this Clause cannot therefore, include any plant which cannot be described as goods and is some immovable property.
Therefore, foundation on which the machinery is to be fixed would not, be by itself, plant within the meaning of the said word as it occurs in Clause (a) of Explanation 1 to Rule 57Q(1). Therefore, so far as these items 1 to 8 and 20 arc concerned, in our opinion, the learned Commissioner (Appeals) has rightly held that these cannot be treated as capital goods within the meaning of Clause (a) to Explanation 1 to Rule 57Q(1) and, therefore, no Modvat credit would be admissible in respect of these goods. The contrary contentions raised by the assessee-appellant cannot therefore be accepted.
9. The assessee claims that, Switch boards and Panels, Cables, Industrial valves, Digital weight indicator, Preheating cyclone ducts, Calciner and Kiln feed, Surface Miner and Micro Generating Sets were items of "capital goods" which were used for the manufacture of the final product cement. This Tribunal in Grasim Cement v. Commissioner of Central Excise, Raipur boards/panels being devices for regulating electric supply, were accessories in the form of "capital goods", essential for proper working of machines and for production of goods and, therefore, Modvat credit was admissible in respect thereof under Rule 57Q of the Rules.
Even for Wires and Cables, relying upon the earlier decision in Collector of Central Excise v. Nova Udyog Ltd. reported in 1996 (88) E.L.T.532, it has been held that they were included in the definition of "capital goods" under the Explanation to Rule 57Q. Insofar as these items are concerned, it can hardly be disputed that they fall within the meaning of "capital goods" for the purpose of Modvat credit.
10. The learned Authorised Representative for the department, however, submitted that Micro Generating Sets (item No. 11) could not have been treated as capital goods in view of Clause (d)(v) of Explanation 1 to Rule 57Q because only Electric Generating sets (of output exceeding 75 KVA) falling under Heading No. 85.02 were to be treated as capital goods, while in the present case the capacity of the electric generating sets for which Modvat credit was claimed, was 5 KVA/10 KVA.Clause (d) was substituted in Explanation 1 by Notification No. 1 l/95-CE(NT) dated 16.03.1995. However, Micro Generating set (item No.11), used in the factory of the manufacturer continued to remain in Clause (c) of Explanation 1. No distinction is sought to be urged between generating sets as included in Clause (c) and electric generating sets, which also would be generating sets. Therefore, while Clause (d)(v) specified electric generating sets of output exceeding 75 KVA, no such restriction is attached to generating sets in Clause (c).
It was also urged that while substituting Clause (d) in Explanation 1 and specifying electric generating sets of output exceeding 75 KVA the necessity to omit generating sets from Clause (c) might have been overlooked.
11. So far as the Static Road roller with accessories (item No. 10), Surface Miner (item No. 13), Hindustan 1025 dumpers (item No. 18) and Diesel engine driven welding set (item No. 19 are concerned, the question whether they fall within the meaning of 'capital goods' under Explanation 1(a) being machines, machinery, equipment, etc., would depend on the fact whether they are used for producing or processing of any goods or for bringing about any change in any substance for the production of final products. Under Rule 57Q(1), the provisions of the said Section apply to finished excisable goods described in the annexure for the purpose of allowing credit of specified duty-paid on the capital goods used by the manufacturer in his factory. The word 'Factory' as defined in Section 2(e) of the Act, means any premises, including preeints thereof wherein or in any part of which excisable goods (other than salt) are manufactured or wherein or in any part of which any manufacturing process connected with the production of the goods is being carried on or is ordinarily carried on. The definition refers to 'any premises' in which the goods arc manufactured or any manufacturing process or any process of manufacture of goods is carried out. In the present case, it has been urged that the place in which the mining operations were carried on by the assessee was within the factory premises as per the Certificate of Registration and the ground plan was also raised before the Commissioner (Appeals). Such a contention in the cross-objection, in which the assessee has alleged that mining operations were carried out within the factory premises as a per the Certificate of Registration and the ground plan. The Commissioner (Appeals), however, did not direct himself to this aspect of the matter namely, whether the mining area was a part of the factory premises as per the ground plan and the Certificate of Registration.
The Commissioner (Appeals) had not directed himself to these aspects of the matter because he proceeded, without any discussion, on the footing that Surface Miner (item No. 13) was an item of capital goods used for the manufacture of the final products and, that Static Road roller with accessories (item No. 10), and Hindustan 1025 dumpers (item No. 18) were used in the mines and not used within the factory of production for the manufacture of final products without examining whether he mining area formed a put of the factory premises, as urged by the assessee. So far as Diesel engine driven welding set (item No. 19) is concerned, it has been held by the Commissioner (Appeals) that the said machine was used for maintenance purposes and, therefore, it cannot be considered as capital goods. In the appeal memo filed before the Commissioner (Appeals), it was specifically contended in respect of this item that this machine was used whenever the power supply was not available and wherever continuous welding was required. It was used for welding in belt conveyor, 'take up' station, raw mill, coal mill etc.
The learned Commissioner (Appeals) was required to consider this contention and give a finding, whether it should be treated as capital goods on the grounds urged by the assessee. There is no basis indicated for treating the said machine as having been used only for maintenance purposes.Vikram Cement v. Commissioner of Central Excise, Indore that as regards Modvat/Cenvat credit on capital goods used in mines which are captive mines so that they constitute one integrated unit together with the concerned cement factory. Modvat/Cenvat credit on capital goods will be available to the assessee. On the other than, if the mines are not captive mines but they supply to various other similar companies of different assessees, Modvat/Canvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules. The Supreme Court had remanded the matter to the respective original authorities for decision on the said issue. In the present case, the Commissioner (Appeals) has not given any finding on the stand taken by the assessee that the mining area was a part of the factory premises as per the ground plan and the Registration Certificate. If the mine from which the material is excavated and used for manufacturing the final product by the assessee is captive mine and a part of the factory premises as urged by the assessee and the capital goods are used in such captive mine, then obviously, the assessee would be entitled to Modvat credit on such capital goods used in the captive mines which constitute one integrated unit together with the cement factory of the assessee.
13. (i) For the aforegoing reasons, the appeals filed by the Revenue are dismissed except as regards the use of the Surface Miner (item No.13) in respect of which the Commissioner (Appeals) is hereby directed to consider whether the said capital goods were used in a captive mine of the assessee.
(ii) The appeals of the assessee-appellant are partly allowed only in respect of Static Road roller with accessories (item No. 10), Hindustan 1025 dumpers (item No. 18) and Diesel engine driven welding set (item No. 19) and the matter is remanded to the Commissioner (Appeals) to consider whether these capital goods were used in the captive mines of the assessee which constituted one integral unit together with the cement factory of the assessee and whether the mining area was a part of the factory premises of the assessee as per the ground plan and the Certificate of Registration as urged by the assessee.