CCE Vs. BRAKES INDIA LTD.

JUDGEMENT

(1.) Both these appeals are directed against the Order -in -Appeal No. 223/98 (M -II) dt. 27.7.1998, by which the Ld. Commissioner (Appeals) has set aside the order of the Original Authority and allowed the appeal of the respondents.

(2.) ld. DR Shri A. Jayachandran submits that the capital goods have been defined under Rule 57Q at the time of introduction of Modvat scheme to capital goods and later the list was enlarged under the Clause d(1) to (x) by Notification No. 11/95 CE(NT), dt. 16.3.1995 as to include such of those machines, which were not covered by the explanation to Rule 57Q earlier. Therefore the item "de -humidifier" is outside the ambit of Rule 57Q. He further submitted that Rule 57Q clearly explains the capital goods as machines, machineries, plant equipment apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. Further the "de -humidifier" are not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. The impugned products are also not a spare parts, components or accessory of any capital goods used for the purpose. The impugned goods merely control the humidity levels. Hence, "de -humidifier" are not eligible for MODVAT credit under Rule 57Q of Central Excise Rules, 1944 as it does not bring about any change in substance in the manufacture of final product. The Ld. DR also relied on the judgment rendered by the Tribunal in the case of Commissioner of Central Excise v. Shanmuge Raja Spinning Mills reported in 1998 (67) ECR 122, in which the Tribunal has denied the benefit of MODVAT credit in respect of humidifiers which was required to be fitted in the textile unit for controlling the humidity in the manufacturing unit. He, therefore, prayed for the impugned order of the Commissioner (Appeals) Chennai, may be set aside and the order -in -original No. 13/97 dt. 10.7.1997, of the Assistant Commissioner of Central Excise may be restored.

(3.) Ld. Advocate Shri R. Raghavan submits that "de -humidifiers" are used in controlling the humidity and this equipment is an accessory to the checking instrument, which is capital goods and Modvat Credit is available to them. He invited my attention to Para - 31 of the Larger Bench decision rendered in the case of Jawahar Mills Ltd. v. CCE Coimbatore, wherein they have held that the decision of Southern Regional Bench in M/s. Shanmuga Raja Spinning Mills that humidifiers are not used for the manufacture of textiles would not be a proper view. The Larger Bench also has held that humidifier is also an item specifically held by the Supreme Court in J.K. Cotton Spinning and Weaving Mills Co. Ltd. to be an item used in the manufacture of goods or processing of goods for sale. He further submitted that the judgment rendered in the case of Jawahar Mills Ltd. (supra) by the Tribunal had been upheld by the Apex Court in . He therefore submitted that the order passed by the Ld. Commissioner (Appeals) is a legal and proper order and is required to be sustained.