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Commissioner Of And Central Excise v. M/S U.P. Steel Muzaffar Nagar - CENTRAL EXCISE REFERENCE APPLICATION No. 114 of 2000  RD-AH 35 (3 August 2001)
[ Hon. C.J.'s Court]
Central Excise Reference Application No. 114 of 2000
Commissioner , Central Excise Meerut.............Applicant
M/s U.P. Steel Muzaffar Nagar..................Respondents.
Hon. S. K. Sen C. J.
By this Application filed under Section 35-H of the Central Excise Act, 1944, ( hereinafter referred to as the Act), the Commissioner, Central Excise, Meerut, seeks a direction from this Court to the Customs Excise and Gold(Control) Appellate Tribunal, New Delhi ( hereinafter referred to as the Tribunal), to draw up a statement of the case and refer the following question of law for opinion to this Court:
"Whether the modivat credit can be allowed on refractories as capital goods prior to 16.3.1995 i.e. the date with effect from which refractories were included in the list of capital goods vide notification no. 11 of 1995 dated 16.3.1995?
The briefly stated facts giving rise to the present case are that the respondent-assessee is engaged in the manufacturing of Steel Ingots, Castings & machinery parts. It had availed Modvat Credit under Rule 57-Q of the Central Excise Rules, 1944( hereinafter referred to as the Rules)for Rs. 2,92,958/- for the period from 23.1.1995 to 31.3.1995 on magnesite ramming masses magnesite bricks and refractories etc. The Superintendent, Central Excise Range III, Muzaffarnagar, issued show cause notice dated 19.5.1995 calling upon the respondent-assessee to show cause as to why the duty amounting to Rs. 2,95,958/- should not be demanded and recovered from them under Rule 57(I) of the Rules read with Section 11-A of the Act as according to him Modvat credit on the aforesaid items had wrongly been availed. The respondent-assessee submitted reply. However, vide order dated 30.1.1996, the Assistant Commissioner, disallowed the Modvat credit of Rs. 1,83,331/- on the ground that refractories has been included under the capital goods vide Notification No. 11 / 1995-CE dated 16.3.1995 w.e.f. 16.3.1995 under Rule 57-Q of the Rules and, thus, no Modvat Credit could have been availed prior to 16.3.1995.
The Commissioner (Appeals) vide order dated 7.2.1997 allowed the appeal filed by the respondent-assessee and held that the notification dated 16.3.1995 is only clarificatory in nature and shall apply retrospectively. The appeal filed by the Department has been rejected by the Tribunal vide order dated 29.9.1999.
We have heard Shri Subodh Kumar learned counsel for the Revenue and Shri A. P. Mathur, learned counsel for the respondent-assessee.
Prior to amendment made in Clause-I of the Explanation by the Notification dated 16.3.1995, the Explanation to Rule 57-Q(1) of the Rules read as follows:
Rule 57-Q. Applicability.-(1) The provisions of this section shall apply to finished excisable goods of the description 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 on the final products, or as the case may be, on such capital goods, if such capital goods have been permitted to be cleared 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[ or by a unit in Software Technology Parks] 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
(c) moulds and dies, generating sets and weigh-bridges used in the factory of the manufacturer."
Vide Notification dated 11/1995 dated 16.3.1995, sub-clause (d) was inserted in clause (1) of the Explanation to Rule 57-Q(1) of the Rules newly inserted Clause (d) is reproduced below:
(d) following goods falling within the Schedule to the Central Excise Tariff Act, 1985(5 of 1986) and used in the factory of the manufacturer-
(i) all goods falling under head Nos. 84.02, 84.05, 84.06, 84.11, 84.12, 84.17, 84.19, 84.21, 84.23, 84.25 to 84.28, 84.80, 85.05, 85.35, 90.11, 90.12, 90.13, 90.16, 90.17 and 90.24 to 90.31;
(ii) auxiliary plants falling under heading No.84.04 for use with boilers of heading No.84.02;
(iii) I.C. engines(other than engines of motor vehicle) falling under heading No. 84.07 or 84.08;
(iv) compressors(other than of a kind used for refrigerating and air-conditioning applications) falling under heading No.84.14;
(v) electric generating sets( of output exceeding 75 KVA) falling under heading No. 85.02;
(vi) Transformers (of power handling capacity exceeding 75 KVA) falling under heading No. 85.04;
(vii) Goods (other than for medical use) of heading No. 90.22;
(viii) Goods (other than of a kind used for refrigerating and air-conditioning applications) falling under heading Nos. 84.81 and 90.32;
(ix) Components, spares and accessories of the goods specified against item (I) to (viii) above;
(x) Refractories falling within Chapter 69;
Shri Subodh Kumar learned counsel submitted that refractories material was earlier not included in the definition of word" Capital Goods" as defined under clause 1 of the Explanation to Rule 57-Q of the Rules and, therefore, the respondent-assessee was not justified in availing Modvat Credit on refractories material prior to 16.3.1995.
Shri A.P.Mathur, learned counsel submitted that even prior to the amendment made on 16.3.1995, refractories fell under the Capital goods, and therefore, Modvat Credit was available on it. He submitted that the amendment is only clarificatory in nature and, therefore, shall apply retrospectively.
The question is as to whether the refractories is covered under the term Capital goods as defined in clause(1) of the Explanation quoted above prior to its amendment on 16.3.1995 or will be included only from 16.3.1995 when clause (d) was inserted therein which specifically included the aforesaid item and whether refractories falling within Chapter 69 as inserted in Clause-1 of the Explanation by Notification dated 16.3.1995 is clarifactory in nature and shall apply retrospectively or not?
We are of the view that the question proposed by the Revenue is a question of law which requires consideration by this Court. Accordingly, we direct the Tribunal to draw up and refer the aforementioned question of law for opinion to this Court.
In the result, the present application is allowed. However, the parties shall bear their own costs.
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