Rajasthan Tools Ltd. Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
1. this case has a chequered history. the appellants were engaged in the manufacture of tools for cutting stones like marble, granite etc.they installed three air-conditioners in their cold press room, metal powder storage & diamond mixing room and quality control laboratory.they took modvat credit on these air-conditioners as capital goods under rule 57q after filing the necessary declaration under rule 57t.the department by letter dated 28-6-95 objected to this, holding that the air-conditioners were not eligible for such credit under explanation (1) to rule 57q. this view of the department was contested by the party in their reply letter. the asstt. commissioner, without taking recourse to the normal show cause notice proceedings, personally heard the party and passed order dated 30-11-95 denying them modvat credit on the air-conditioners. against this order of the asstt.commissioner, the party preferred appeal to the commissioner (appeals).the appellate authority found that, as the duty amount involved in the case exceeded rs. 50,000/-, the matter was beyond the jurisdiction of the asstt. commissioner. that authority, therefore, remanded the matter to the juris-dictional dy. commissioner/add1. commissioner for re-adjudication of the matter in accordance with the principles of natural justice. that order dated 18-11-96 of the commissioner (appeals) was got reviewed by the department and, accordingly, an appeal was preferred to this tribunal. this tribunal by final order no.a/143-150/98-nb, dated 21-2-98 remanded the matter to the commissioner (appeals) for passing a speaking order on the jurisdictional issue as well as on the merits of the case. pursuant to the remand order, the-commissioner (appeals) has passed order dated 26-12-2000 holding that, in view of the tribunal's decisions, modvat credit was not admissible in respect of air-conditioners. hence the present appeal filed by the assessee.3. shri abhisekh jain, ld. counsel for the appellants, submits that the lower appellate authority has passed the impugned order without touching the jurisdictional issue remanded by this tribunal. he further submits that the principles of natural justice have been violated in the impugned proceedings inasmuch as no show cause notice has ever been issued to the appellants. ld. counsel, referring to the merits of the case, submits that the question whether air-conditioners installed in the factory of production of excisable goods are eligible for capital goods credit under rule 57q is liable to be answered in the affirmative in view of the decision of this tribunal's larger bench in jawahar mills ltd. v. cce [1999 (108) e.l.t. 47 (tribunal-larger bench] affirmed by the supreme court. he submits that the air-conditioners were used for maintaining optimum levels of temperature and humidity in the cold press room, metal powder storage & diamond mixing room and the quality control laboratory of the appellant's factory, without which it was not possible to carry out the process of manufacture of tools of specific quality. the counsel submits that the air-conditioners were integrally connected with the process of manufacture as the same were used "for producing or processing goods or for bringing about change in substances for the manufacture of final products" in terms of explanation (1) to rule 57q(1) as the rule stood at the material time (june 1995). he, therefore, prays for setting aside the impugned order and allowing the modvat credit on air-conditioners.4. ld. jdr, shri s.c. pushkarna, reiterates the findings of the commissioner (appeals).5. i have examined the submissions. ld. counsel for the appellants has submitted that the commissioner (appeals) has not complied with this tribunal's remand order insofar as the jurisdictional question is concerned. on a close perusal of the impugned order, i find that this submission is factually correct. it was specifically directed by this bench in the final order dated 21-2-98 that a speaking order be passed on the jurisdictional issue after considering the relevant circulars and instructions of the cbec. the lower appellate authority, however, did not touch the jurisdictional issue and proceeded to decide the case on its merits. this action is clearly against the tribunal's directions and the same requires to be deprecated. ld. commissioner (appeals) perhaps would not have acted in the above manner in breach of judicial discipline, had he borne in mind that, apart from the judicial powers under section 35c of the central excise act, this tribunal shall exercise control over departmental authorities including him under rule 40 of the cegat (procedure) rules, 1982. for the reasons already recorded, i set aside the impugned order and allow this appeal by way of remand, directing the commissioner (appeals) to pass fresh speaking order on the jurisdictional and other issues in terms of the final order dated 21-2-98 ibid after affording a reasonable opportunity of being heard, to the appellants.

Judgment:
1. This case has a chequered history. The appellants were engaged in the manufacture of tools for cutting stones like marble, granite etc.

They installed three air-conditioners in their Cold Press Room, Metal Powder Storage & Diamond Mixing Room and Quality Control Laboratory.

They took Modvat credit on these air-conditioners as capital goods under Rule 57Q after filing the necessary declaration under Rule 57T.The department by letter dated 28-6-95 objected to this, holding that the air-conditioners were not eligible for such credit under Explanation (1) to Rule 57Q. This view of the department was contested by the party in their reply letter. The Asstt. Commissioner, without taking recourse to the normal show cause notice proceedings, personally heard the party and passed order dated 30-11-95 denying them Modvat credit on the air-conditioners. Against this order of the Asstt.

Commissioner, the party preferred appeal to the Commissioner (Appeals).

The appellate authority found that, as the duty amount involved in the case exceeded Rs. 50,000/-, the matter was beyond the jurisdiction of the Asstt. Commissioner. That authority, therefore, remanded the matter to the juris-dictional Dy. Commissioner/Add1. Commissioner for re-adjudication of the matter in accordance with the principles of natural justice. That order dated 18-11-96 of the Commissioner (Appeals) was got reviewed by the department and, accordingly, an appeal was preferred to this Tribunal. This Tribunal by Final Order No.A/143-150/98-NB, dated 21-2-98 remanded the matter to the Commissioner (Appeals) for passing a speaking order on the jurisdictional issue as well as on the merits of the case. Pursuant to the remand order, the-Commissioner (Appeals) has passed order dated 26-12-2000 holding that, in view of the Tribunal's decisions, Modvat credit was not admissible in respect of air-conditioners. Hence the present appeal filed by the assessee.

3. Shri Abhisekh Jain, ld. Counsel for the appellants, submits that the lower appellate authority has passed the impugned order without touching the jurisdictional issue remanded by this Tribunal. He further submits that the principles of natural justice have been violated in the impugned proceedings inasmuch as no show cause notice has ever been issued to the appellants. Ld. Counsel, referring to the merits of the case, submits that the question whether air-conditioners installed in the factory of production of excisable goods are eligible for capital goods credit under Rule 57Q is liable to be answered in the affirmative in view of the decision of this Tribunal's Larger Bench in Jawahar Mills Ltd. v. CCE [1999 (108) E.L.T. 47 (Tribunal-Larger Bench] affirmed by the Supreme Court. He submits that the air-conditioners were used for maintaining optimum levels of temperature and humidity in the Cold Press Room, Metal Powder Storage & Diamond Mixing Room and the Quality Control Laboratory of the appellant's factory, without which it was not possible to carry out the process of manufacture of tools of specific quality. The counsel submits that the air-conditioners were integrally connected with the process of manufacture as the same were used "for producing or processing goods or for bringing about change in substances for the manufacture of final products" in terms of Explanation (1) to Rule 57Q(1) as the Rule stood at the material time (June 1995). He, therefore, prays for setting aside the impugned order and allowing the Modvat credit on air-conditioners.

4. Ld. JDR, Shri S.C. Pushkarna, reiterates the findings of the Commissioner (Appeals).

5. I have examined the submissions. Ld. Counsel for the appellants has submitted that the Commissioner (Appeals) has not complied with this Tribunal's remand order insofar as the jurisdictional question is concerned. On a close perusal of the impugned order, I find that this submission is factually correct. It was specifically directed by this Bench in the Final Order dated 21-2-98 that a speaking order be passed on the jurisdictional issue after considering the relevant circulars and instructions of the CBEC. The lower appellate authority, however, did not touch the jurisdictional issue and proceeded to decide the case on its merits. This action is clearly against the Tribunal's directions and the same requires to be deprecated. Ld. Commissioner (Appeals) perhaps would not have acted in the above manner in breach of judicial discipline, had he borne in mind that, apart from the judicial powers under Section 35C of the Central Excise Act, this Tribunal shall exercise control over departmental authorities including him under Rule 40 of the CEGAT (Procedure) Rules, 1982. For the reasons already recorded, I set aside the impugned order and allow this appeal by way of remand, directing the Commissioner (Appeals) to pass fresh speaking order on the jurisdictional and other issues in terms of the Final Order dated 21-2-98 ibid after affording a reasonable opportunity of being heard, to the appellants.