IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR

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CENTR.EXCISE APPEAL No. 1 of 2006

HINDUSTAN ZINC LTD

V/S
UNION OF INDIA & ORS

Mr. RAMIT MEHTA, for the appellant / petitioner

Mr. R.SANCHETI for Mr. VK MATHUR, for the respondent

Date of Order : 22.9.2008

HON'BLE SHRI N P GUPTA,J.

HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J.

ORDER
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This appeal by the assessee seeks to challenge the order of the Tribunal dated
2.6.2005 affirming the order of the Commissioner.

The appeal was admitted on 13.1.2006 by framing the following substantial

question of law:-

“Whether the Tribunal was right in disallowing modvat credit on capital goods namely, iron
& steel items under Rule 57Q of Central Excise Rules, 1944 used as parts and components of
eligible manufacturing machinery/equipments used in various Sections/Sub-Sections of the
appellant's plant?

At the outset, we may observe that the question as framed proceeds on the
assumption that the iron and steel items were used as parts and components of eligible
manufacturing machinery/equipments used in various Sections/Sub-Sections of the
appellant's plant, and comprehending the question, about correctness of disallowance of
modvat credit on these items, while on the other hand, what we find from the perusal of
orders of the three learned authorities below is, that the matter has been decided against the
assessee, on the ground, that the items are used for structural constructions, and have not been
found to be used as parts and components of eligible manufacturing machinery/equipments.

Thus, the question precisely is not about correctness of disallowance of

modvat credit on the capital goods used as part and components of eligible manufacturing
machinery/equipments, rather the question is, as to whether the Tribunal was right in
disallowing modvat credit on the goods in question, on the ground of their being used for
structural construction purposes and in not holding them to be used as parts and components
of eligible manufacturing machinery/equpments, as was the contention of the assessee.
 That essentially would be a question of fact and would not be a substantial
question of law, but then a look at the order of the learned Tribunal shows, that the Tribunal
has passed a very short order, we would not use the word 'cryptic order', and without any
reasoning and discussion, has simply proceeded on the basis, that these items not being
parts/components of capital goods, the credit has rightly been denied. As against this, what
we find is, that in the reply to the show cause notice submitted by the assessee before the
Assessing Officer himself also, the assessee has submitted the flow-sheet of the process, and
explaining, as to how the manufacturing process proceeds, and as to how the particular items
are used for manufacturing, what part of what particular machine, and thereafter had pleaded
that the pressure hood of sintering machine and condenser and furnace roof etc. are made out
of MS plates, beams and channels, these are basically being used as a spare to the above
machines. Then in the memo of appeal filed before the learned Tribunal, in para 8, the things
were explained in great details, as to how the items are used as components, and spare,
eligible to modvat credit under clause (b) and (c) of Rule 57Q, and in our view, the learned
Tribunal was required to go into the contentions in detail, and was also required to have come
to its own conclusions, one way or the other.

Thus, we are at a loss to have the required findings of the learned Tribunal one
way or the other.

Though we would have ourselves also undertaken the exercise of deciding the
question, as to whether these items have been used for structural purposes, or as components,
but then we think it better to remand the matter to the learned Tribunal to decide the matter
afresh, after considering the detailed submissions made in the memo of appeal, and also after
providing reasonable opportunity of hearing to both sides to project their versions and
counter-versions.

Accordingly, the appeal is allowed and the matter is remanded back to the
learned Tribunal for deciding the matter afresh keeping in view the above observations. The
learned Tribunal is also directed to decide the matter most expeditiously.

( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J.

/tarun/