Hotline Glass Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:

.....appeal dated 9th december, 2003 that upheld the order in original denying the modvat credit to the appellants and imposing penalty.2. the relevant facts that arise for consideration is that the appellant is a manufacturer of picture tubes. for the purpose of manufacturing picture tubes, they were required to install a furnace wherein inputs were to be melted. for manufacturing and fabrication of furnace, the appellants procured bricks, jointing cement and other items. as central excise duty was paid on all these items, the appellants availed modvat credit on these items on duty paying documents during the period april to august, 2001 as inputs.3. revenue issued show cause notice to the appellants seeking to deny the modvat credit to the extent of 50% on the ground that refractory and refractory materials are covered under the head capital goods and hence appellants are eligible to avail only 50% of duty as modvat credit. the appellants resisted the show cause notice on the ground that these bricks, refractory materials etc. are inputs for the manufacture of furnace within the factory premises and hence they have correctly availed the modvat credit as inputs. the adjudicating.....

Judgment:

1. This appeal is filed against the order in appeal dated 9th December, 2003 that upheld the order in original denying the Modvat credit to the appellants and imposing penalty.

2. The relevant facts that arise for consideration is that the appellant is a manufacturer of picture tubes. For the purpose of manufacturing picture tubes, they were required to install a furnace wherein inputs were to be melted. For manufacturing and fabrication of furnace, the appellants procured bricks, jointing cement and other items. As Central Excise duty was paid on all these items, the appellants availed Modvat credit on these items on duty paying documents during the period April to August, 2001 as inputs.

3. Revenue issued show cause notice to the appellants seeking to deny the Modvat credit to the extent of 50% on the ground that refractory and refractory materials are covered under the head capital goods and hence appellants are eligible to avail only 50% of duty as Modvat credit. The appellants resisted the show cause notice on the ground that these bricks, refractory materials etc. are inputs for the manufacture of furnace within the factory premises and hence they have correctly availed the Modvat credit as inputs. The adjudicating authority confirmed the demand and also imposed penalty. On appeal, Commissioner (Appeals) also concurred with the findings of the adjudicating authority. Hence this appeal.

4. Considered the submissions made at length by both the sides. I find from the record that the appellant had filed a classification declaration under Rule 173-B as regards the fabrication/manufacturing of furnace in their factory. The appellant has also made a declaration in the said classification to the effect that the said furnace will be used within the factory for use in or in relation to the manufacture of final product which is dutiable. After filing the declaration, the appellant availed credit on the items like bricks, refractory, joining cement etc. as inputs. The provisions of Rule 57-AA of Central Excise Rules, 1944 during the relevant period, defines the capital goods and inputs as under: (1) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90 heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Central Excise Tariff Act, 1985; (2) Components, spares and accessories of the goods specified at (i) above; (7) Storage tank used in the factory of the manufacturer of the final products; (d) 'input' means all goods, exempt high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants.

Explanation 2. - Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture.

5. It may be noticed that explanation 2 to the definition of input indicated that the inputs which are used in the manufacture of capital goods would get covered under inputs, despite the fact that they may be mentioned as capital goods in the definition of Capital goods. It is common knowledge that for the manufacturing capital goods, in any factory, many inputs will be required. These inputs by themselves may be capital goods but combination of all these inputs would bring into existence capital goods, which in this case is a furnace. The appellant has right from the beginning made a declaration that they will be using bricks, jointing cement etc. as input for manufacture of furnace. I do not find any reason to deny the Modvat credit to the appellant as is being sought by the impugned order.

6. In view of the facts and circumstances as mentioned above, the impugned order is liable to set aside and I do so. The appeal is allowed.