IMPORTANT POINT
In order to avail of Modvat/Cenvat credit, an Assessee has to satisfy the Assessing Authorities that the capital goods in the form of component,spares and accessories had been utilized during the process of manufacture of the finished product.

JUDGMENT

Altamas Kabir, J. —

1.The short point involved in these appeals is whether the Appellant/Assessee is eligible for Modvat Credit on certain goods for the period comprising November and December, 1999.

2.The Appellant, M/s Madras Cements Ltd., Alathiyur, hereinafter referred to as ‘the Assessee’ is the holder of Central Excise Registration No.1/Cement/97 and is engaged in the manufacture of cement and clinker coming within the ambit of Chapter 25 of the Central Excise Tariff Act, 1985, hereinafter referred to as ‘CETA, 1985’.

3.The Revenue’s contention is that for the months of November and December, 1999, the Assessee had taken Modvat Credit on ineligible capital goods amounting to Rs.8,42,843/-. The further contention of the Revenue is that the Assessee was not entitled to such credit, inasmuch as, it had taken Modvat Credit on items which did not come within the purview of capital goods under Rule 57Q of the Central Excise Rules, 1944, although it was claimed by the Assessee that the said items comprised components, spares and accessories within the meaning of Explanation 1(d) of Rule 57Q(1) relating to capital goods. Accordingly, on 31st March, 2000, the Assessee was issued show cause notice no.11 of 2000 asking it to show cause as to why the amount of Modvat Credit of Rs.8,42,843/- should not be disallowed and recovered under Rule 57U(3) of the Central Excise Rules, 1944, and why interest at the rate of 20% per annum should not be demanded under Rule 57U thereof, if the Modvat Credit wrongly availed was not paid within three months from the date of receipt of the demand notice. The Assessee was also asked to show cause as to why a penalty should not be imposed under Rule 173Q(b)(b) of the aforesaid Rules.

4.Replying to the said show cause notice, the Assessee asserted that the inputs used in or in relation to the manufacture of the final products were eligible for Modvat Credit and that the ground plan had been enclosed with the application for grant of registration certificate indicating that the mines were also situated in the factory complex and were an integral part of the factory. The Assessee contended that parts of the Bucket Elevator (8434.00) and Wagon Loaders (8431.00) were parts of machinery mentioned under serial nos.1 to 4 of the Table under Rule 57Q(1) and were eligible for Modvat Credit as per the Board’s Circular No.276/110/96 TRU.

5.The show cause notice was adjudicated by the Assistant Commissioner of Excise on 4th June, 2003, and by his order No.22 of 2003, the Assistant Commissioner disallowed Modvat Credit amounting to Rs.4,31,749/- with regard to some of the items. The Assistant Commissioner held that, inasmuch as, the mandatory requirement stipulated in serial no.5 of the Table to Rule 57Q had not been complied with, he was not inclined to allow Modvat Credit in respect of the goods listed in serial nos.32 to 43 of the annexure to the notice. An appeal preferred before the Commissioner (Appeals) against the order of the Assistant Commissioner was rejected on 16th October, 2003, upon holding that the items in question were not capital goods and were not, therefore, entitled to Modvat Credit admissible under Rule 57A as well. The Commissioner (Appeals) held that the credit was not admissible on the goods listed under serial nos.32 to 43 of the show cause notice.

6.The matter was then taken in appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, by way of Appeal No.E/108/04/MAS on 20th January, 2004, which upheld the order of the Commissioner (Appeals). Aggrieved by the order of CESTAT, the Appellant filed the present Appeals before this Court.

7.Appearing for the Appellant/Assessee, Mr. A.K. Ganguli, learned Senior Advocate, submitted that the case of the Assessee was squarely covered by the decision of this Court in Jaypee Rewa Cement vs. Commissioner of Central Excise [(2001) 8 SCC 586], wherein explosives used for the extraction of limestone for manufa