INDIA CEMENTS LTD. Vs. CCE

JUDGEMENT

(1.) THIS is an appeal filed by M/s The India Cements Ltd. against the order of the Commissioner of Central Excise (Appeals), Trichy denying Modvat Credit on Ion Exchangers (Rs. 7040/ -) and Point Attack Pits (Rs. 1,12,006/ -) under Rule 57Q of the Central Excise Rules, 1944. The dipute relates to the period October 1999 to December 1999. The Commissioner (Appeals) found that Ion Exchangers were chemicals used for treatment of water for softening the same. These goods fell under CSH 39.14 not covered for eligibility to credit under Rule 57Q. The other item viz. Point Attack Pits were spares, for surface miners falling under sub -heading 8430. Sub -heading 8430 was excluded from the purview of capital goods as per Rule 57Q. Surface miner was used in the appellants' mines. As the capital goods used within the factory of production alone were eligible for capital goods credit, the item was not eligible for credit under Rule 57Q. Accordingly, the lower appellate authority sustained the denial of credit to the tune of Rs. 1,19,046/ - and imposed penalty of Rs. 10,000/ - under Rule 173Q(bb) of the Central Excise Rules, 1944 (on appeal from the Department).

(2.) SHRI V. Ravindran, learned Consultant for the appellants argued that ion exchanger was a chemical used for softening water which was used in the cooling water system, which supplies cooling water to various critical equipments like Kiln, Cooler, Raw Mill, Coal mill, Cement mill, compressors, DG sets etc. He further submitted that use of clean water was required to prevent calcium and magnesium deposits in various equipments which adversely affect their efficiency. The ion exchangers removed hardness of water and it worked on the principle of exchange of ions. It is used to help prevention of corrosion. He has also submitted a write -up as directed by the Bench at the earlier hearing indicating the functions and use of ion exchangers. He cited the decision of the Delhi Bench of the Tribunal in the case of CCE, v. Kitply Industries Ltd. wherein the Tribunal allowed capital goods credit to the said item used in the de -mineralisation plant to boil the feed water. In that case ion exchanger was used for desalination of boiler walls. The Tribunal held that ion exchanger was part of the water treatment plant and entitled to capital goods credit. In the subject case, from the functions of ion exchanger it was obvious that the item in question was eligible for Modvat credit as capital goods. He also cited the Larger Bench decision of the Tribunal in CC & CE, Meerut v. Modi Rubber Ltd. wherein the Tribunal had held that the declaration filed by the assessee in terms of Rule 57Q of Central Excise Rules, 1944 was sufficient for extending credit within the meaning of Rule 57A. In the above decision Tribunal also held that lubricant used in the machinery for its better functioning was used to facilitate manufacture and so was used in or in relation to the manufacture of final products.

(3.) THE learned SDR submitted that ion exchanger falling under CSH 39.14 was not capital goods as per Rule 57Q, as it stood at the relevant time. Therefore, the credit was correctly denied. As regards PAP, he submitted that the said item was not eligible for credit as the same were not used within the factory. He however, did not oppose the submission of the learned consultant that the same were used in the mines shown in the ground plan submitted by the assessee to the department.