COMMISSIONER OF CENTRAL EXCISE Vs. RAJASTHAN TEXTILE MILLS

JUDGEMENT

(1.) THIS Revenue Appeal is against the order of the Commissioner of Customs (Appeals) by which spares for Hoist were held to be capital goods in terms of Rule 57Q of the Central Excise Rules, 1944. The Commissioner had followed the judgment of the Tribunal in C.C.E., Meerut v. Nova Udyog and C.C.E. v. R.K. Marbles and Ors. holding that 'Cranes' and 'Hoists' are capital goods in terms of Explanation l(d) under Rule 57Q(1) of the said rules.

(2.) LD . JDR, Shri Y.R. Kilania refers to the grounds of the appeal filed by the Revenue and submits that spares for Hoists are used for repair/maintenance of Hoists. Hoist itself is used for merely transporting fibre to dyeing machines. Thus, the use of Hoists is for material handling or transporting of the goods. The Hoist is therefore not used for producing or processing or for bringing about any change in any substance in the manufacture of final products is provided under Rule 57Q and therefore, the claim for Modvat credit for spares for Hoists will not also be covered by the definition of capital goods. He also mentioned that the decision of the Tribunal in R.K. Marbles and Ors. v. C.C.E., Jaipur, has not been accepted by the Department and the Reference Application has been filed in the said case. Further, by the Circular issued by the Board on 5 -7 -1994, it has been clarified that credit on material handling equipment was not admissible. Hoist is a material handling equipment and credit is therefore not admissible either for Hoists or for spares of Hoists. Reliance was also placed on the Tribunal decision in C.C.E., Coimbatore v. Shanmugaraja Spinning Mills (P) Ltd. reported in [1997 (89) E.L.T. 84], in which' it was held that the definition of 'capital goods' in Rule 57Q is restricted and relates only to the goods used for production, processing or for bringing about any change in the substance in the manufacture of final product. It was submitted on behalf of the Revenue that this meant that the goods for which credit is taken must have a nexus with the actual process for bringing about any change in the substance of the goods by direct participation in the manufacturing stream. Spares of Hoist did not fall under the category of goods which had a nexus with the actual process of manufacture of the final products. The Department has therefore, prayed for setting aside the order of the Commissioner (Appeals) insofar as it related to spares for the 2 Tons Hoist.

(3.) LD . Counsel for the Respondents has submitted that Hoists come within the category of material handling equipment and the Tribunal has in various decisions given earlier held that material handling equipment such as EOT Cranes, Fork Lift, Conveyor Belt, etc. have been held to be capital goods for purpose of Rule 57Q. He also relies on the recent Tribunal decision in Sterlite Industries India v. C.C.E. reported in 1998 (102) E.L.T. 281 (Tribunal) in which stationary material handling equipment consisting of EOT Cranes and their spares and other lifting and handling machinery, Hoists, Electrical appliances consisting of Uninterruptible Power Supply System (UPSS) have been held to be capital goods and eligible for Modvat credit under Rule 57Q. In paragraph 3 of the Tribunal's order in Sterlite Industries India Ltd. (supra), the Tribunal has referred to the earlier decision in C.C.E., Tiruchirapalli v. M.M. Forgings Ltd. reported in 1997 (89) E.L.T. 617 (Tribunal) in which Fork lifts used for lifting and transporting final product of raw materials within the factory of production would fall under capital goods since they were used for producing or processing of final product.