GODREJ GE APPLIANCES LTD Vs. CCE

JUDGEMENT

(1.) IN these two matters the stay applications filed are taken up for hearing. It is brought to the notice of the bench by the learned Counsel for the appellant that the issue is a covered one and the appeal itself may be heard, to which learned JDR has no objection. So both the appeals are taken up for consideration as submitted with the consent of JDR. In both these appeals, the issue involved and the input are the same. So both the cases are taken up together and common order is passed in Appeal E/228/99.

(2.) THIS is the party's appeal against the order of the Commissioner of Central Excise (Appeals), Mumbai dated 18.11.1998, praying for setting aside the same and to restore the order -in -original and for further relief, if any. In Appeal E/228/99 the appellant Godrej GE Appliances Ltd. is engaged in the manufacture of refrigerator and the appellant Godrej and Boyce Mfg. Co. Ltd. in Appeal E/229/99 is engaged in the manufacture of among other products, safe, strong boxes and other furniture. In both these cases fork lift truck, a handling equipment, is used for shifting the raw materials from one place to another. They received a show cause notice dated 15.11.1994 in Appeal E/228/99 and dated 17.11.1994 in Appeal E/229/99, as the appellant in both the cases had availed credit on fork lift truck as an input which was not used in or in relation to the manufacture of the final product, viz. safe, and strong boxes and refrigerators. The fork lift truck did not fall within the ambit of the definition of the input as it was used for shifting the goods from one place to another and the Modvat credit was not admissible. The appellant was called upon to show cause why the credit amounting to Rs. 97,365.50 in Appeal E/229/99 and Rs. 1,59,426.06 in Appeal E/228/99 should not be disallowed and recovered under Rule 571 of the Central Excise Rules and why penalty should not be imposed under Rule 173Q(1)(b). After the receipt of the reply from the appellant in both the cases and after holding a personal hearing and hearing the party in both the cases the order -in -original was passed dropping the show cause notices on 26.3.1996 in Appeal E/228/99 and on 21.12.1995 in Appeal E/229/99. The department preferred an appeal against that order of the Commissioner of Customs and Central Excise (Appeals), Mumbai which was allowed and the demand was confirmed in both the cases. Hence these appeals.

(3.) IN support of the appeals, the learned senior counsel has submitted in the course of the arguments, and explained Rule 57A of the Central Excise Rules, and also the Explanation thereunder which details the inclusion of the inputs, and its exclusion in the Clauses (a), and c(i) and also challenged the impugned order on the ground that the approach of the appellate authority in distinguishing the case laws relied on in the original order is not proper and correct. He has submitted that the input used in this case for shifting of the heavy articles, such as tin sheets for the manufacture of refrigerators and other metal articles for the purpose of the manufacture of furniture and safe and it is an essential and integral material handling equipment and such activity of handling, lifting, transferring and transporting of raw material was a process of manufacture in or in relation to the manufacture of the final product. He has relied on in the case of W.S. Industries (India) Ltd. v. CCE (paras 1 and 4) of which deal with the Modvat on Pyrometric Cones used as an essential aid in the manufacture of ceramic materials since specifically designed for being placed in the furnace to give an indication of the degree of firing, and under Rule 57A it is eligible for the benefit of Modvat credit as covered under Explanation to Rule 57A as an input. It does not fall under the exclusion category. He has also relied on in the case of Tata Engineering and Locomotive Co. Ltd. v. CCE, in paras 3, 28 and 29, contending that the Explanation to notification 217/86 and Explanation to Rule 57A are similar, and so this decision squarely applies to the instant case on hand, which has held that measuring instruments and material handling equipments even though machines or appliances continue to be eligible for exemption for the benefit under notification 217/86 which exempts specified goods used captively for further manufacture of final products notified under Modvat. The exclusion does not exclude all machines, but only those machines used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of final products. Rule 57A of the Central Excise Rules, 1944 is also considered. Para 3 points out notification 217/86 and the Explanation thereunder is the same as that of Explanation to Rule 57A of the Central Excise Rules. In paras 28 and 29 of the order referred the Supreme Court's judgment in the case of CCE v. Rajasthan State Chemical Works [1991 (36) ECR 465 (SC)] whereunder the distinction between the term "processing and process" has been brought out. According to that, as in the preceding para 28 the concept of processing is that commodity must as a result of the operation experience some change. Applying this criterion, it has been brought out that the items in question like gauges and appliances, lifting tackles and trolleys and conveyors manufactured and captively used by the appellants, herein, are used for processing of the material in the sense to bring about a change therein. So long as this is not established it cannot be held that such inputs are hit by the Explanation for being excluded from the exemption. The decision in W.S. Industries (India) Ltd. under Rule 57A is also dealt with holding that the exclusion clause is identically worded in support of the appellants' case. The learned JDR has supported the impugned order.