M/S. Pennar Aluminium Co. Limited vs Commissioner Of Central Excise & ...

[Arising out of Order-in- Original No. 23/1995 dtd. 2/6/1995 passed by the Commissioner of Central Excise & Customs, Nagpur]

For approval and signature:

Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

M/s. Pennar Aluminium Co. Limited : Appellants

VS

Commissioner of Central Excise & Customs, Nagpur : Respondent

Appearance

Shri. Rajesh Ostwal, Advocate for the Appellants Shri. H.M. Dixit, Asstt. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 3/6/2015 Date of decision: 3/6/2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in- Original No. 23/1995 dtd. 2/6/1995 passed by the Commissioner of Central Excise & Customs, Nagpur, wherein the Commissioner has disallowed modvat credit of Rs. 3,49,974/- on charging machines and lathe machines. Aggrieved by the said order the appellant is before me.

2. Shri. Rajesh Ostwal, Ld. Counsel for the appellant submits that appellant is a manufacturer of various Aluminium products for manufacturing the same, charging machine is used for transportation aluminium coils from charging section and loading inside the annealing furnace and take it out from the furnace. Thereafter annealing aluminium coils is part of the process for manufacture of aluminium products. It is his submission that the process of charging and annealing of aluminium coils which is carried out by the help of charging machines is a part and parcel of manufacturing process of aluminium products therefore the charging machines is directly used in relation to the manufacture of final product. He placed reliance on following judgments:

(a) CCE Vs. machine Plastics Ltd.[2011(132) ELT 71(Tri. Del.)

(b) Grasim Cement Vs. CCE[1997(96)ELT354(Tri.)]

(c) CCE Vs. Vikram Cement[2000(123)ELT 628(Tri)] affirmed by Supreme Court in the case reported at 2002(145) ELT A86(SC)].

(d) Banco Products (India) Ltd. Vs. CCE [2009(235)ELT 636(Tri.LB).

All the above judgments are on the issue of admissibility of modvat credit under Rule 57Q in respect of material handling equipment. In the present case also charging machine is used as a material handling machine therefore as per the use of the machine as well as issue supported by various judgments, the credit is admissible. As regard lathe machine, it is used for maintenance of rollers which is used in the rolling mills directly in relation to the manufacture of final product. He placed reliance on following judments:

(a) Pennar Aluminium Co. Ltd. Vs. CC, Ex, Nagpur[2008(229) ELT 543(Tri. Mumbai)].

(b) NRB Bearings Ltd. Vs. CCE[2000(123) ELT 781(Tri).

He submits that rollers which is used directly in the manufacture is frequently get defected during the process of manufacture which requires maintenance from time to time which is a continuous process for which lathe machine is used therefore the use of roller and maintenance thereof for further use in the manufacture of final product is directly related to their manufacturing activity and therefore credit should be allowed on lathe machines.

3. On the other hand, Shri. H.M. Dixit, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that as regard lathe machines, in the judgments relied upon by the Ld. Counsel in the case of NRB Bearings Ltd(supra) lathe machine in that case was used for trimming, boring and threading various components which is manufacturing process of the assessee whereas in the present case lathe machine is not used in the process of manufacture but it is used for maintenance of certain parts used for manufacturing process therefore the judgment of NRB Bearings Ltd is not applicable. hence the credit is not admissible on lathe machine. As regard charging machine, he submits that the handling of coils with the help of charging machine is not ancillary process of manufacturing therefore is not used for manufacturing process hence is not eligible for modvat credit under Rule 57Q of Central Excise Rules, 1944.

4. I have carefully considered the submissions made by both sides and perused the record.

5. As regard the charging machine, it is observed that the use of the machine is not under dispute that the charging machine is used for transporting aluminium coil into the furnace and taking out coils after annealing from the furnace. The annealing process is vital process in the entire manufacturing process of the aluminium product in the appellants factory. Annealing process cannot be carried out without using charging machine therefore in my view charging machine is directly used in the manufacture of final product i.e. aluminium product in the factory of the appellant. In various judgments as cited by the Ld. Counsel this Tribunal held that material handling equipment is capital goods in term of definition provided under 57Q of Central Excise Rules, 1944. I agree with the argument of the Ld. Counsel that charging machine is material handling equipment which is used during the process of manufacture of final product therefore even by various judgments the admissibility of the modvat credit is not under dispute. As regard lathe machine it is used for maintenance of roller and it continuously used for manufacture of final product. In every metal industries such as steel and aluminium product like roller are prone become to defective after use and required regular maintenance for which lathe machine is very essential. Since roller were used directly in final product, time to time maintenance done by lathe machine is also integral part of the entire manufacturing process. As regard Ld. A.Rs submission that in the case of NRB Bearings Ltd the use of lathe machine is directly in the process of manufacture of final product whereas in the present case, it is use for maintenance of rollers. I agree with the Ld. A.R. for the reason that in case of NRB Bearings Ltd drilling machines use for maintenance work which has held as modvat credit under rule. In view of the said judgment even machine used in the work shop for maintenance are eligible for the modvat credit. I am therefore of the considered view that both the items i.e. Charging machine and lathe machine are qualified as capital goods and squarely covered under the of definition of capital goods provided under 57Q of Central Excise Act, 1944, hence eligible for modvat credit, therefore the impugned order is modified and appeal of the appellant is allowed.

(Dictated in court)

Ramesh Nair Member (Judicial)

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