IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA Ex. Ref. No. 7 of 2000 Date of decision: 24.6.2008 Commissioner of Central Excise Petitioner Vs. M/s A.C.C. Ltd. Respondent Coram: The Hon’ble Mr. R.B.Misra, Judge. The Hon’ble Mr. Justice Sanjay Karol, Judge. Whether approved for reporting? For the Petitioners: Mr.Sandeep Sharma, Assistant Solicitor General of India. For the Respondent : S/Shri Rahul Mahajan and Sudeep Singh Bhangoo, Advocates Per R.B.Misra, J. (Oral) Heard Mr. Sandeep Sharma, learned Assistant Solicitor General of India for the petitioner. Heard Mr. Rahul Mahajan, learned counsel for the respondent. 2. The present Central Excise Reference has been preferred under Section 35H(1) read with Rule 218 of Central Excise Act, 1944 (hereinafter referred to as the Act) in reference to order dated 10.3.2000 of Central Excise Gold (Control) Appellate Tribunal, New Delhi (in short called 2 `CEGAT’) whereby the following substantial question of law has been preferred for adjudication:- “During the relevant period only those items were covered under the definition of Capital Goods which were used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products or which found mention under Sub-clause (d) of Clause (1) under explanation to Rule 57 Q of the Central Excise Rules, 1944. The question arises whether H.T. Switchgear Panel and 66 KV Breaker, Protective Chain for tyre and Logic Controller were covered under the definition of Capital Goods during the relevant period when the same were not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product or which found no mention under sub-clause (d) of Clause (1) under explanation to Rule 57 Q of the Central Excise Rules, 1944?” 3. The petitioner filed appeal No. 1971/99-NB before the `CEGAT’ against the order dated 14.5.1999 whereby the benefit of modvat credit in respect of switch gear panel, protection chain for tyre and logic controller, was allowed as `capital goods’ under Rule 57 Q of the Central Excise Rules (in short the Rules). 4. It has been submitted on behalf of the petitioner that these goods are not `capital goods’ as provided under Rule 57Q. According to the learned counsel for the petitioner switch 3 gear panels is a part of generator set of 66 KV and at the relevant time, the modvat credit is admissible only on generator sets, exceeding 75 KV. In respect of protection chain for tyre, he submits that these chains are used with the dumpers which is a handling and unloading machinery and logic controller is an instrument used for controlling the operation timing for proper evacuation of material and is an electric equipment which is essential for electric control or distribution of electricity only. 5. Keeping in view the submission of learned counsel for the respondent that the goods in question are `capital goods’ and relying upon the case of Kanoria Chemicals Vs. C.C.E. 1997 (95) E.L.T. 301 (T) and the Larger Bench of the Tribunal in the case of Jawahar Mills Ltd. Vs. C.C.E. 1999 (108) E.L.T. 47 `CEGAT’ has held that electric switches are entitled for the benefit of modvat credit. In respect of logic controllers, relying upon the decision of the Tribunal in the case of Jindal Polymers Vs. C.C.E. 1998 (103) E.L.T. 569 (T) and on Mansurpur Sugar Mills 1996 (87) E.L.T. 91 (T) protection chain for tyre was held to be entitled for the benefit of modvat credit. 6. For adjudicating the present question of law, it is necessary to refer to the relevant provisions of Rule 57Q of Central Excise Rules, 1944 (for short the Rules) as below:- “57-Q. Applicability.-(1) The provisions of this section shall apply to finished excisable goods of the description 4 specified in the annexure below (hereinafter referred to as the `final products’) for the purpose of allowing credit of specified duty paid on the `capital goods’ used by the manufacturer in his factory and for utilizing the credit so allowed towards payment of duty of excise leviable on the final products, or as the case may be, on such capital goods, if such capital goods have been permitted to be cleaned under Rule 57-S, subject to the provisions of this section and the conditions and restrictions as the Central Government may specify in this behalf: Provided that credit of specified duty in respect of any capital goods produced or manufactured- (a) in a free trade zone and used for the manufacture of final products in any other place in India; or (b) by a hundred per cent export-oriented undertaking or by a unit in an Electronic Hardware Technology Park and used for the manufacture of final products in any place in India, shall be restricted to the extent of duty which is equal to the additional duty leviable on like goods under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) equivalent to the duty of excise paid on such capital goods. Explanation:-For the purposes of this section,- (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; (b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and 5 (c) moulds and dies, generating sets and weighbridges used in the factory of the manufacturer. (2) `specified duty’ means duty of excise or the additional duty under Section 3 of the Customs Tariff act, 1975 (51 of 1975).” 7. In this case, the Commissioner Central Excise challenged the modvat credit on switch gear panels, protection chain for tyre and logic controller. The Tribunal in the case of Kanoria Chemicals (supra) held that switches and panel boards are entitled for the benefit of modvat credit as they are used as component/spare parts of plant, therefore, the respondents are entitled for the benefit of modvat credit in respect of switch gear panels. In respect of protection chain for tyres, the Commissioner has not disputed that these are used as accessories to the dumpers, which are used for transport of material from one place to another and the Tribunal in the case of Mansurpur Sugar Mills (supra), held that the material handling equipment is entitled for the benefit of modvat credit. As these protection chains are used as accessory to the material handling equipment, these are entitled for the benefit of modvat credit. The Tribunal in the case of Jindal Polymers (supra) held that measuring instruments, such as, process control instrument, are entitled for the benefit of modvat credit. Logic controller is an instrument for controlling operation timing, delay or 6 sequence of air blasters for proper evacuation. Hence, they are entitled for the benefit of modvat credit. 8. Learned counsel for the Union of India, however, while dealing with the decision of Supreme Court in Commissioner of Central Excise Coimbatore and others Vs. Jawahar Mills Ltd. and others (2001) 6 SCC 274 has fairly submitted that the Supreme Court has indicated that the language used in explanation to Rule 57Q of Rules is said to be liberal and the Supreme Court in Jawahar Mills case (supra) has very categorically indicated that the items brought under capital goods would depend upon its user. However, learned counsel for the petitioner has very emphatically submitted that in the explanation clause of capital goods indicated in Rule 57 Q the items indicated in explanation 1(a), 1(b) and 1(c) are very specific and categorical and the items for which benefit was being given by the respondents are not directly covered under the category of capital goods. 9. It has been submitted that on analysis of different items claimed for by the respondent and on concurrent analysis of their uses by the Commissioner and by the learned Tribunal, it has become abundant that H.T. Switchgear Panel and 66 KV Breaker, Protective Chain for tyre and Logic Controller by their use are to be covered in the definition of capital goods more specifically in the light of observations made by the Supreme Court in Jawahar Mills Ltd. (supra). 7 10. After hearing learned counsel for the parties and after perusal of the documents, we are of the considered view that the learned tribunal has correctly analysed that the items for which the benefits are being claimed for has rightly been arrived at to be covered under the capital goods. Therefore, in view of the above analysis, the question of law referred to above is dealt with accordingly in favour of the respondent. Accordingly, the Central Excise Reference No. 7 of 2000 is disallowed. ( R. B. Misra ), J. June 24, 2008(K) ( Sanjay Karol ), J.