Per V.P. Gulati :

The issue in the appeal relates to the grant of MODVAT credit in respect of certain equipments. The learned lower authority has denied the appellants the MODVAT credit in respect of certain items holding that these items are not covered by the definition of capital goods as set out under Rule 57Q of the Central Excise and Salt Act.

2. The learned Consultant for the appellants has made submissions in respect of each of the items and his submissions are considered in the light of what he has argued in the order in which these are dealt with in the lower authority's order.

Fork Lift and Lift materials:

3. The plea of the learned Consultant is that the appellants are manufacturing pharmaceutical items and the handling of the materials for feeding the same at the different stages of processing is essential and for that reason, therefore, the MODVAT credit in respect of these items should be allowed. In this connection he referred us to the judgment of the Tribunal in the case of MM Forgings Ltd., Vs., CCE reported in 1997 (89) ELT 617. In that case taking note of the judgment of the Hon'ble Supreme Court in the case of Rajasthan Chemical Works reported in 1991 (55) ELT 444 SC we have held as under in para 4 of our order:

4. We have considered the pleas made by both the sides. We observe that on reading of the definition of capital goods as set out under Rule 57Q, we ourselves had entertained a doubt prima facie that the equipment like Fork Lifts may not be covered by this definition. A plain reading of the definition would appear to indicate that the activities in which the capital goods are to be used have to be such that these are for either producing or processing of the inputs or for bringing about any change in the materials used for the manufacture of the finished products. However we observe that the scope of Modvat Scheme was enlarged to cover the capital goods with a view to give relief to the industry from cascading effect of duty. The terms 'capital goods' therefore has to be read in the context of the use of the equipments in the assessee's factory. What has to be seen is whether the equipment used in a part of the manufacturing stream in the assessee's factory and whether the use is for production or processing or for bringing about any change in the materials used in the manufacture of the final product. The Hon'ble Supreme Court in the case of Collector of Central Excise Vs Rajasthan State Chemical Works reported in 1991 (55) ELT 444 had occasion to consider the scope of the term 'processing' in the assessee's factory in that case and which equipment was only doing the function of lifting of brine solution. In that case the Hon'ble Supreme Court has clearly held that handling would also be a process in the context of notified finished products in case it could be shown that without the function of handling the final product could not be manufactured. What is therefore to be seen is whether the equipment has to be allowed. In the present case the goods involved are Fork Lifts which are used for lifting. The respondents it has been pleaded are manufacturing iron forgings of various sizes weighing as much as one tonne or so and unless these are lifted and the materials out of which the same has been manufactured are transported, the manufacturing process is not possible. We observe that the respondents' case in the light of the plea made will have to be considered in the light of the judgment of the Hon'ble Supreme Court referred to supra. The plea of the Revenue is that the definition of capital goods as set out under Rule 57Q should not be read with the wordings of Rule 57S. We observe that the Modvat Scheme is an integrated scheme and there are various provisions under different rules from which the scope of the scheme can be read. Under Rule 57S it is clearly stated that the Modvat credit in respect of capital goods can be utilised so long as the same were used in or in relation to the manufacture