COMMISSIONER OF CENTRAL EXCISE Vs. ICL SUGARS LTD.

JUDGEMENT

(1.) THE Revenue has preferred this appeal by challenging the order passed by the Tribunal which has upheld the order of the appellate authority by observing that the inputs used in the manufacture of storage tanks which are immoveable property is also admissible for Modvat credit. The assessee is engaged in the manufacture of sugar. It is a holder of Central excise registration certificate. They were availing of the benefit of Modvat credit up to June 30, 2000 and Cenvat credit from July 1, 2000 in respect of duty -paid inputs and capital goods. They claimed Cenvat credit on the raw materials used for construction of storage tanks. The assessing authority allowed Modvat credit in respect of water storage tanks on the ground that water is an essential raw material for manufacture of sugar after conversion into steam. The water storage tank is a component of the main machinery, namely, boiler and the excise duty paid on the inputs in the construction of water storage tanks are eligible for availing of Modvat credit. However it has disallowed Modvat credit in respect of syrup and molasses storage tank - -MS staging of tank and shell plates/bottom plates/roof plates used for constructing non -excisable final molasses storage tank and shell of final molasses storage tank, under rule 57U of the Central Excise Rules, 1944. The reasoning given for disallowing the Cenvat credit to these storage tanks was that the molasses tank is constructed on the floor with a concrete foundation and the shell of the final molasses storage tank will be placed over the concrete to hold about 2500 tons, and since the final molasses storage tank is erected to the earth, it becomes non -excisable.

(2.) THEREFORE any components used in the non -excisable molasses final storage tanks are ineligible for Modvat credit. His reasoning did not find favour with the Commissioner and He set aside the order and extended the benefit even in respect of those, storage tanks. Aggrieved by the same, the Revenue preferred an appeal to the Tribunal.

(3.) THE learned counsel appearing for the, Revenue assailing the impugned order contended that as per the definition of rule 57Q there was no storage tank included in the definition of capital goods It is only by notification dated March 1, 2001 in the definition of capital goods the storage tank is inserted. Therefore for the period anterior to the said amendment Cenvat credit could not have been given on the inputs used in the manufacture of storage tanks. Even otherwise though the water stored in a storage tank is used in the manufacture of sugar, the syrup and molasses stored in the storage tank are not used in the manufacture of sugar, on the contrary it is derived in the course of manufacture of sugar and therefore the assessee is not entitled to the benefit of Cenvat credit. Though in the definition of rule 57Q the storage tank was not included, it is clear from the aforesaid definition that the tubes, pipes and fittings thereof used in the factory were included in the definition of capital goods. The storage tank has been held to be a component to the main machinery, namely, boiler and the benefit is extended to the inputs used in the construction of the storage tank though it is also embedded to the land. On the same reasoning the assessing authority ought to have extended the benefit to the syrup and molasses storage tank also, as they are by -products in the course of manufacturing activity which are also excisable at the time of selling the same to the asses -see. It appears even when the storage tanks if specifically mentioned in the definition of capital goods by liberally incorporating these provisions the benefit was extended to the assessees. However the controversy remains. In order to set right this controversy by a notification, specifically storage tank is introduced within the definition of capital goods. The said insertion is clarificatory in nature. Under these circumstances even though the said insertion was in the year 2001 we are concerned with the period anterior to the said insertion. Having regard to the aforesaid facts and also the fact that the assessing authority has himself extended the benefit to storage tank storing water as a component to main machinery, namely, boiler, he ought to have extended the benefit to the storage tanks which are also part of the factory premises, in which the by -products are stored and thereafter sold as a finished product. In that view of the matter, we do not find any justification to interfere with the orders passed by the appellate authority. In those circumstances we answer the substantial questions of law in favour of the assessee and against the Revenue.