Mahalakshmi Glass Works Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. this issue for decision in this appeal is whether refractory bricks used for repairing and constructing furnace are "capital goods" within the meaning of rule 57a of the central excise rules, and the assessee is entitled to take modvat credit of duty. in the order impugned in the appeal, the commissioner has held that they are not "capital goods", since the furnace of which they form part are not classifiable under tariff heading 84.17.2. the advocate for the appellant explained that the furnace in which the appellant melted the raw material for making glass is at the heart of its manufacturing operation.3. the departmental representative contends that the furnace itself is not is an excisable commodity, and that therefore no credit can be taken on the components parts of such a furnace.4. we are not able to find a requirement in rule 57q that for credit to be taken on part of the capital goods, the "capital goods" themselves must be liable to duty. while the commissioner has not given reasons, the basis for this view of the collector appears to be that furnace is immovable property, having been built at site, and it is therefore not goods classifiable under any of the headings of the excise tariff. this observation would be true of a number of items of machinery used in a plant. an example would be a system for carrying raw material or finished goods. such a system would be immovable property, and hence not liable to duty. its components however, such as the electric work etc. would have discharged such duty, and credit could not be denied only because of the immovable nature of the machinery of which they form part. the definition of capital goods of in rule 57q is very wide, comprising "machines, machinery, plant, equipment, apparatus, tools or appliances are used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products", and components spares and accessories of any of these. the bricks in question are undoubtedly part of the furnace which is capital goods. the fact that the furnace in questions was not classifiable under a particular tariff heading would not affect the fact that it is covered by the category of machines machinery etc. specified in clause l(a) to the explanation to rule 173q. the bricks which form part of the furnace would therefore be eligible for credit under clause l(b). in the absence of any express provision to deny credit to parts of such goods, commissioner's reasoning cannot be upheld. we cannot import anything into the rule which does not exist in it.5. credit was therefore available on these goods in terms of explanation under rule 57q even as it stood before its amendment in march, 1995 by inclusion of refractories of chapter 69. the expanded definition appears to have been necessitated to clarify the position as it stood to set at rest doubts which existed, both outside and within the department.

Judgment:
1. This issue for decision in this appeal is whether refractory bricks used for repairing and constructing furnace are "Capital Goods" within the meaning of Rule 57A of the Central Excise Rules, and the assessee is entitled to take Modvat credit of duty. In the order impugned in the appeal, the Commissioner has held that they are not "capital goods", since the furnace of which they form part are not classifiable under Tariff Heading 84.17.

2. The Advocate for the appellant explained that the furnace in which the appellant melted the raw material for making glass is at the heart of its manufacturing operation.

3. The Departmental Representative contends that the furnace itself is not is an excisable commodity, and that therefore no credit can be taken on the components parts of such a furnace.

4. We are not able to find a requirement in Rule 57Q that for credit to be taken on part of the capital goods, the "Capital Goods" themselves must be liable to duty. While the Commissioner has not given reasons, the basis for this view of the Collector appears to be that furnace is immovable property, having been built at site, and it is therefore not goods classifiable under any of the headings of the Excise Tariff. This observation would be true of a number of items of machinery used in a plant. An example would be a system for carrying raw material or finished goods. Such a system would be immovable property, and hence not liable to duty. Its components however, such as the electric work etc. would have discharged such duty, and credit could not be denied only because of the immovable nature of the machinery of which they form part. The definition of capital goods of in Rule 57Q is very wide, comprising "Machines, machinery, plant, equipment, apparatus, tools or appliances are used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products", and components spares and accessories of any of these. The bricks in question are undoubtedly part of the furnace which is capital goods. The fact that the furnace in questions was not classifiable under a particular tariff heading would not affect the fact that it is covered by the category of machines machinery etc. specified in Clause l(a) to the explanation to Rule 173Q. The bricks which form part of the furnace would therefore be eligible for credit under Clause l(b). In the absence of any express provision to deny credit to parts of such goods, Commissioner's reasoning cannot be upheld. We cannot import anything into the rule which does not exist in it.

5. Credit was therefore available on these goods in terms of explanation under Rule 57Q even as it stood before its amendment in March, 1995 by inclusion of refractories of Chapter 69. The expanded definition appears to have been necessitated to clarify the position as it stood to set at rest doubts which existed, both outside and within the department.