Per K.K. Bhatia :

Appeal No. E/1768/2001/NB/SM:

The appellants manufacture cement clinker falling under sub-heading 2502.10. They availed modvat credit of Rs. 3,09,552/- in October/November, 1995 on the item - Packing Machine (constituted of different parts) under Rule 57Q of Central Excise Rules, 1944. They were however issued a show cause notice dated 20.1.1996 by the Asst. Commissioner of Central Excise, Jabalpur Division in which it was inter alia alleged that they were registered as a manufacturer of cement clinker falling under Chapter No. 2502.10 only; that they had no silo, cement mill and packing house in the factory. Hence, these goods are used outside the factory in some other factory. Thus they did not conform to the definition of capital goods under Rule 57Q of Central Excise Rules, 1944. They were therefore called upon to show cause why the modvat credit of the aforesaid amount should not be disallowed to them under Rule 57U and why a penalty should not be imposed on them under Rule 173Q and Rule 209. On considering the reply of the party, the Asst. Commissioner vide his Order dated 18.9.98 disallowed them the above said amount of modvat credit.

2. The party filed appeal but the same is rejected by the Commissioner (Appeals), Bhopal vide his Order dated 30.4.2001.

3. This is an appeal against the impugned order of Commissioner (Appeals). I have heard Shri S.K. Bansal, Chartered Accountant for the appellants and Shri H.C. Verma, JDR for the respondents. The ld. Consultant for the appellants is contending that they have two units located side by side but having separate central excise registrations. One unit is manufacturing clinker and the other is manufacturing cement. He contended that though the packing machine was meant to be used for packing cement but the modvat credit of the duty paid on this machine was taken in the unit manufacturing clinker. He is contending that the term 'factory' is defined under Section 2(e) of the Central Excise Act, 1944 as meaning - any premises including the precincts thereof, wherein or in any part of which excisable goods are manufactured, or wherein or in part of which any manufacturing process connected with the production of these goods is being carried out. It is submitted that though their clinker and the cement units had separate registrations at the relevant time, nevertheless being located side, they would fall within the definition of one 'factory' and therefore the packing machine though meant for packing cement would be eligible for taking of the modvat credit in their clinker unit. The ld. Consultant for he appellant in support of his contention has relied on the decision of the Tribunal in the case of Dhampur Sugar Mills Ltd. Vs. CCE, Meerut 2001 (43) RLT 299 (CEGAT-Del.). I have carefully considered these submissions. The term 'capital goods' under the Explanation (1) to Rule 57Q is defined as follows:

"(1) "Capital goods" means -

(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products".

4. From the above definition it would be observed that only the machines, machinery etc. used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products is eligible for availing the modvat credit as capital goods under Rule 57Q. In the present case, the final product of the unit in which the modvat credit is availed is clinker which is neither packed nor the machine is not used for it. The machine is used for packing cement which is not the final product of this unit. The cement is manufactured in another unit of the same party. The modvat credit therefore is not admissible to the appellants on such packing machine.

Appeal No. E/1769/2001/NB/SM:

5. In this case, the appellants have availed the modvat credit of Rs. 38,536/- on the Rotary Air Valve used in their clinke