K. Sankararaman, Member (T) -
(1.) THE Collector of Central Excise, Bhubaneswar has filed this appeal challenging the Order-in-Appeal passed by the Collector of Central Excise (Appeals) whereby he allowed the appeal filed before him by M/s. Emami Paper Mills Ltd. who are the respondents herein. By his impugned Order the Collector (Appeals) held them to be eligible for MODVAT benefit in respect of inputs like synthetic cloth, Metal cloth, Dryer Fabrics and Machine cloth and set aside the Order of the Assistant Collector of Central Excise, Cuttack holding that these were not eligible for the said benefit as they are used as tools, equipment and appliances. THE Collector (Appeals) came to the conclusion that these cannot be called machinery plant etc. which are excluded from the definition of inputs in the Explanation under Rule 57A. In the appeal before us, it has been contended that these goods are used by the respondents for making the surface of their product, paper, smooth and for absorbing the excess contents of water in the pulp and that they are neither used as input nor raw material in or in connection with manufacture of paper. THErefore, these goods are in the nature of appliances and equipments used for bringing about change in a substance and hence MOD VAT credit is not admissible. It has, therefore, been urged that the Order-in-Appeal be set aside and the Assistant Collector's Order-in-Original upheld.
(2.) Shri M.N. Biswas, learned S.D.R. argued the Collector's case when the appeal was heard by us. He adopted the reasoning contained in the appeal memorandum and pleaded that the appeal be allowed.
Shri S.K. Bagaria, learned Counsel for the respondents gave a strong counter to the contentions raised in the appeal. He submitted that the goods in question had been classified by the Assistant Collector in his Order-in Original under Tariff Heading 5909. Under Chapter 59, Textile fabrics and Textile articles of a kind suitable for industrial use are covered. Machinery, machines, tools, equipment and appliance which are not included in the definition of inputs in terms of the Explanation under Rule 57A are not covered under the said Chapter 59. There is no dispute about the use of the goods in the manufacture of paper. The area of dispute is whether these are in the excluded category as per the said Explanation under Rule 57A. That Explanation specifically refers to machine, machinery etc. and does not mention parts thereof. The excluded items not eligible for MODVAT benefit fall under Chapters 82,84,85, 90 etc. From Section XVI of the Central Excise Tariff covering machinery and mechanical appliances and parts and accessories of such articles, articles of textile material for technical use falling under Heading 5909 stand excluded vide Section Note 1(e) therein. No mechanical function is performed by the goods in question. In terms of Section Note 5 ibid, the expression 'machine' used in the said Notes means any machine, machinery, plant, equipment, apparatus or appliance cited in the heading of Chapter 84 or Chapter 85. As there is no definition of the terms machines, machinery etc. in Rule 57A, the Tariff definition of the said items will apply. The goods in question are not permanent items of machinery but have short life of about 30 days. After use, they have to be taken out and replaced. Shri Bagaria then referred to the publication of the Food and Agriculture Organisation of the United Nations (Rome, 1973) on Forestry and Forest Products Studies - Guide for Planning Pulp and Paper Enterprises, (an extract of which was included in the Paper Book submitted by the respondents) wherein, under the heading Non Fibrous Raw Material, other consumed materials have been referred to. These include felts, washer wires and machine wires. Shri Bagaria contended that the products like Felt cannot be considered as machinery etc. for the purpose of Rule 57A. Machines etc. have some permanence and are not consumable items. He, then, referred to the scope of the term machinery and machines as decided in a number of judgments copies of which had been enclosed in the Paper Book. He contended that at the most, the department can say that these are parts of machines because they are fitted to the machines. But the important point here is that parts are not excluded under Rule 57A. He referred to the judgment of Bombay High Court in Vishal Electronics Pvt. Ltd. v. Union of India, reported in 1989 (44) E.L.T. 420 wherein it had been held that exemption to Television camera was not extendable to lenses. Lenses are no doubt parts of the camera but aH the same they were not treated as the camera which was the exempted item. In so many Tariff Headings and Notifications where the intention is to cover parts also they have been specifically included. In Rule 57A only machines, machinery tools etc. are mentioned but parts are not. Proceeding further, Shri Bagaria fairly conceded that two Tribunal decisions are directly against him. These are (1) Collector of Central Excise, Putna v. Ashim Paper Products, 1990 (50) E.L.T. 120 (Tribunal); (2) Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise, 1990 (50) E.L.T. 252. In the former case decided by a Single Member Bench of this Regional Bench itself Wire Mesh and industrial cloths used for removing moisture from the wet pulp were held to be in the nature of appliances. The learned Counsel submitted that in view of the arguments advanced by him about the scope of the term 'appliances' which term appears in the heading of Chapter 84 and in view of the specific exclusion of the goods in question from the machinery chapter by virtue of the Section Note 1(e) and the actual Tariff classification applied by the department in their own case viz. Chapter 59 for the Textile materials and 7413.10 for the metal cloth, they cannot be called appliances and hence he would submit that the said decision would not be binding on this Bench as these arguments were neither advanced before nor considered by the Bench in that case. With regard to the second case of Andhra Pradesh Paper Mills the South Regional Bench had held that as machineries, equipments and apparatus by themselves have been precluded from the benefit of MOD VAT credit, as a corollary thereto, the parts which are used in the machineries to make them functional are also not entitled to the benefit of the MOD VAT scheme. These parts are to be held to be used in relation to the machines themselves and not in relation to the manufacture of the goods. Shri Bagaria submitted that he would, with respect, invite our attention to another judgment of the same South Regional Bench where they had rejected the plea of Revenue that since equipments are excluded, parts of the same should also be taken to be excluded for MOD VAT benefit. They had observed that there is no warrant to read the parts into the description of excluded category of goods under Rule 57A. This ratio is favourable to the lines of approach taken by him. He referred to the arguments advanced by him that the exclusion of machines etc. from the benefit of MODVAT apply only to such goods and not parts thereof.
(3.) SHRI Bagaria then cited the following decisions and advanced the proposition that consumable inputs even if they are used in conjunction with equipment or tools but used in the process of manufacture would be eligible for MODVAT benefit :-
(1) Collector of Central Excise v. Hindustan Development Corporation Ltd., 1990 (47) E.L.T. 376.
(2) Collector of Central Excise v. Heavy Engg. Corporation Ltd., 1990 (49) E.L.T. 531 Paras 6 & 7.
(3) Jyoti Steel Industries v. Collector of Central Excise, 1991 (53) E.L.T. 14.
(4) Gujarat Alkalies & Chemicals Ltd. v. Collector of Central Excise, 1989 (41) E.L.T. 424, Paras 8 & 9.
(5) Cominco Binani Zinc Ltd. v. Collector of Central Excise, 1990 (50) E.L.T. 248.
(6) Collector of Central Excise v. Andhra Sugar Ltd., 1990 (50) E.L.T. 289.
(7) Travancore Cochin Chemicals Ltd. v. Collector of Central Excise, 1990 (50) E.L.T. 172.
(8) Collector of Central Excise \. Bharat Aluminium Cq., 1987 (29) E.L.T. 569.
He also raised a legal point that the notice for the alleged wrong availment of credit having been issued on 16-2-1988 in respect of credits utilised in March, May and July, 1987 was time barred there being no allegation of any suppression fraud etc. He relied upon the decision of this Bench in Collector of Central Excise, Patna v. TELCO reported in 1990 (28) E.C.R. 522 for this stand taken by him which he submitted was an alternative ground without prejudice to the arguments advanced by him on the merits of their case. He, therefore, pleaded that the department's appeal be dismissed.;