PHOENIX INDUS. LTD Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THIS appeal has been filed against the order of the Commissioner (Appeals), Ghaziabad dated 18 -2 -1998 by which Modvat credit to the tune of Rs. 17,355/ - claimed by the appellants on Carton Sealing Machines under Rule 57Q was denied to them. The Commissioner (Appeals) had accepted the Department's Appeal filed against the Order -in -Original by which the Asst. Commissioner had allowed the said credit.

(2.) THE Asst. Commissioner had held that the machine was used for packing/strapping of the final product which is essential to render the finished goods viz., Shoes, marketable. The Asst. Commissioner observed that it was the settled position in law that any process incidental or ancillary for the manufacture of finished goods which renders the goods marketable, is a process of manufacture and packing is an essential process which renders the final product marketable. The Asst. Commissioner had also referred to the amendment made on 16 -3 -1995 to Explanation of Capital Goods specifying within the category of capital goods, Carton Sealing Machines coming under Tariff Sub -heading 8422.90.

(3.) THE Commissioner (Appeals) in the impugned order had on the other hand, accepted the Department's contention that Carton Sealing Machines did not bring about any change in the substance for the manufacture of the final product viz., Shoes, nor was it used for producing or processing any finished goods. He therefore held that Carton Sealing Machines cannot be considered capital goods for purposes of the definition of capital goods under Rule 57Q. He also accepted the Department's contention that capital goods are those items which are used for producing or processing any finished goods or for bringing about any change in the substance for the manufacture of final products. The use of Carton Sealing Machines was only for sealing cartons, which was the material used for packing. It had nothing to do with the manufacturing process required for making Shoes, the final product manufactured by the appellants. He therefore held that the said item cannot be considered to be an integral process of manufacturing of the final product.