COMMISSIONER OF CENTRAL EXCISE Vs. INDIA CEMENTS LTD.

JUDGEMENT

(1.) BOTH these Civil Miscellaneous Appeals are at the instance of the Revenue. C.M.A. No. 1390 of 2007 covers the period December, 1999 to February, 2000 and C.M.A. No. 659 of 2006 covers the period October, 2000 to December, 2000. The assessee herein are manufacturers of cement, falling under Sub Heading No. 2502.29 of the Schedule to the Central Excise Tariff Act, 1985. The assessee availed CENVAT credit on capital goods under Section 57AA of the erstwhile Central Excise Rules, 1944 in respect of Underground Telephone Cable falling under Sub Heading No. 8544.90. Admittedly, the goods were used for communication purposes in various places inside the factory premises. On the allegation that ATC Conductor PVC insulation Armoured PVC Sheathed Underground Telephone Cables are, in no way, connected with the manufacturing activity and hence, the credit taken was irregular, show -cause notice was issued for withdrawal of the benefit. The assessee contended that the cables were used only in the factory for the purpose of providing communication within the factory between different locations. Consequently, the claim of the assessee for availing MODVAT credit could not be denied. The Assessing Officer, however, rejected the plea that the capital goods should have a nexus to the final product. Since telephone cables were used for communication purpose, the claim of the assessee merited to be rejected. Aggrieved by this, the assessee went on appeal before the Commissioner of Central Excise (Appeals), who allowed the appeal based on the decision reported in : 1998 (108) ELT 47 (Tri.) (Jawahar Mills Ltd. Vs. CCE, Coimbatore). The Commissioner pointed out that there was no dispute regarding the receipt and utilisation of the impugned cables within the factory. Thus, the claim was allowed. Aggrieved by this, the Revenue went on appeal before the Customs Excise and Service Tax Appellate Tribunal, which rejected the appeal on the ground that Section 57Q applied to the facts of the case that capital goods being used in the factory and not being an excluded item, the assessee was entitled to MODVAT credit. Thus, the Revenue's appeal was rejected. Hence the present Tax Case Appeal.

(2.) LEARNED Standing Counsel appearing for the Revenue placed reliance on the decision of the Apex Court reported in : 2007 (214) E.L.T. 481 (S.C.) (Collector of Central Excise Vs. Solaris Chemtech Limited) and, 2000 (240) E.L.T. 641 (S.C.) (Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi -III) and contended that unless the goods in question were used in or in relation to manufacture of the final product, the assessee was not entitled to the benefit of MODVAT credit. He pointed out that the Apex Court had interpreted the expression "in relation to" to have a wider connotation. Consequently, inputs which did not enter into the finished goods would not be entitled for MODVAT credit.

(3.) HEARD learned counsel appearing on either side and perused the material placed on record.