Archana Wadhwa, Member (J)

1. The dispute involved in the present appeal relates to three items i.e. gear pump, spinneret and spinning pot under the provisions of Rule 57A for the period July 1992 to April 1994. Whereas the appellants contention is that the said goods are the parts of spinning machines used by the appellants in the manufacture of viscose filament rayon yarn, the Revenue has denied the credit by treating the said goods as equipment/appliances/machineries etc. falling under excluded categories of Rule 57A.

2. The appellant, in the memo of appeal, has given the processes of manufacture of Rayon yarn as under:

2. The appellant states that for manufacture of Rayon Yarn first of all high quality Rayon Grade Wood Pulp Sheets containing about 92% to 94% of Alfa Cellulose are treated with strong caustic soda solution in a steeping press. Thereafter, the solution is drained out from the tank and the steeped sheets are pressed at about 3 times the weight of the original air dry pulp. The reaction is allowed to proceed at a controlled temperature. The combination of such cellulose present in wood pulp with alkali (caustic soda) is known as alkali cellulose. The sheets of alkali cellulose are broken into fine crumbs by consecutive shredders. These small crumbs are then aged and cooled in ageing and cooling drums respectively for a particular period of time and temperature. The cooled alkali cellulose is mixed with carbon-di-sulphide under vacuum to form alkali cellulose xanthate and is dissolved in dulute solution of caustic soda to get honey coloured fluid called "viscose". This young viscose containing impurities (present in raw materials) is filtered and stored under low temperature in a ripening room and allowed to decompose to certain degree to allow it to obtain the best spinning characters. Lastly, this viscose is put under a vacuum to remove air bubbles before being sent to Spinning Section. Deaeration removes from the viscose solution small air bubbles which would otherwise cause weak spots in the final yarn or could cause breaks in the filaments in the subsequent spinning process. The material is then sent to Spinning Section through pipelines and then is pumped into the Spinning Machine.

3. The items in question as per the appellants, are parts/equipments of the spinning Machine, the use and function of the items has been given by the appellants from the various authoritative books as under:

Viscose Gear Pump:

(a) This pump is usually of a Gear Wheel Type. This pump is used for controlling the flow of viscose (a honey like liquid) by increasing or decreasing the speed to the desired level so that the yarn of any particular denier can be obtained. The pumps action ensures constant and regular delivery of viscose to the filter and spinning jet at the exact rate required for the denier being spun. Alteration in the speed of the pump drive enables the denier to be changed. The said pump is an essential part/component of the spinning machine.

(b) In the aforesaid man-made textile Encyclopedia, in connection with the said pump, it has been stated, inter alia, as under:

The pump consists essentially of a pair of precision cut gears which rotate in a close fitting chamber formed by two side plates and a cut out center plate. Feed and delivery orifices to the gear teeth are provided in the side plates, and viscose is fed to fill the spaces between the gear teeth as they pass the intake port. Mashing of the gears at the exit port squeezes the viscose out to the spinneret. The pump will function and meter accurately over a wide range of pressures. The pumps are lubricated by controlled leakage of spinning solution to the bearing surfaces. Designs using three gears have been developed to damp pulsations of larger capacity pumps.

(c) Due to corrosive action of the fluid i.e. the viscose (containing Caustic Soda) passing through such gear pumps, they get worn out and lose efficiency with the passage of time. As a result, the throw of viscose gets disturbed and may not be of desired accuracy. Such gear pumps are accordingly, replaced and the worn out pumps are discarded and disposed of.

Spinneret:

(a) Rayon yarn is an assemblage of filaments continuously spun through the microscopic holes in the spinneret. Such spinning is done by passing the viscose under pressure through such spinneret. When the viscose solution (containing caustic) comes in contact with spin bath containing Acid, Zinc and Sodium Sulphate, it coagulates. The spinnerets are made of alloy of gold and platinum, as they are more resistant to acid and caustic at working temperature of about 55% C. The spinnerets are kept submerged inside the spinbath solution containing acid, zinc and sodium sulphate and as such this is the best material to withstand corrosion for a longer period. The very fine microscopic smooth circular holes of spinnerets are of 70 to 80 micron diameter and the number of holes is decided for the denier, being spun ranging between 40 denier to 600 denier. Usually the spinnerets are of 12, 24, 40, 50, 70 and 90 holes.

(b) In the aforesaid Glossary edited by American Viscose Corporation, spinneret has been defined as under:

Spinneret. A metallic cap or jet with microscopic holes in the flat surface through which spinning solutions are forced emerging as fine filaments into a coagulating medium.

(c) In the aforesaid man-made Textile Encyclopedia the following passage appears in connection with Spinneret:

The spinneret. The entire synthetic fibre industry depends largely upon the spinneret as an extrusion die. For viscose the spinneret is usually made of a 90/10 platinum-rhodium alloy which is hard and corrosion resistant Hole sizes range from 40 to 200 in diameter and are held to tolerances of 1 Holes must be perfectly smooth and are usually countersunk to a specified shape on the inside surface. Replacement costs are reasonable and they car be cleaned and serviced easily. Cups are formed ranging in size from 1/2 to 3 in. in diameter, and the number of holes ranges from 1 to 20,000 depending upon the product to be made. These holes are punched in a specified pattern on the face of the cup. 2.

Spinning Pot:

(a) The pot is a plastic/bakelite re-enforced pot. It is slightly conical in shape to facilitate the removal of spun cakes. After the filaments come out continuously from the holes of spinnerets, they are passed through the godet wheels and glass funnel into the pot revolving at 7000 RPM and thereby the filaments thus coming out continuously get twisted together to form the raw yarn. The pot rotates around 7000 revolution per minute. The raw yarn is collected inside the pot due to centrifugal force.

(b) Such Spinning Pot/Box has been defined in the aforesaid Glossary as under:

Box, Spinning. A rapidly rotating container in which synthetic yarn which have just coagulated are wound into an annular cake. Also called pot, bucket.

(c) In course of continuous run, the pot loses dynamic balancing and the brim of the pot gets damaged with recurring breakage of glass funnel inside the pot and thereby the inner surface gets pit marks and the pot is to be replaced with a new pot as it cannot be reused or repaired.

Shri S.K. Bagaria, Ld. Advocate appearing for the appellants urged that admittedly the above items are parts of the spinning machine and they get damage through their use and require replacement periodically. Drawing my attention to the show cause notice, he submits that the allegations made in the notice was that the said items classified under Chapter 84 were not the consumable items in course of viscose, filament & yarn but on examinations were found either parts of machineries, appliances or equipments and therefore, not eligible for Modvat credit. He submits that when the show cause notice itself admits the goods to be parts of machineries, which after continuous use become worn out and non-usable requiring replacement, the same would not be hit by the Exclusion Clause of Rule 87A inasmuch as the said Exclusion Clause does not apply to the parts of the machineries. He places strong reliance on the Larger Bench decision in the case of Union Carbide India Ltd. v. Collector of Central Excise, Call reported in wherein it was held that parts of the paper making machine or machinery were not covered by the Exclusion Clauses of Rule 57A which only covers machines, machineries, plants, equipments, apparatus, tools or appliances and not parts thereof, He furtner submitted that the said Larger Bench decision has got its approval from the Honble Patna High Court in the case of Collector of Central Excise, Patna and Ors. v. Tata Engineering & Locomotive Company Ltd., Jamshedpur and Ors. 1999 (31) RUT 800 (Patna) in para 35 of the said judgment it was observed by Shri Justice that "I have gone through the Full Bench decision of the Tribunal and I agree with the views and the findings recorded in that judgment." He also submitted that none of the items in question performs any independent and self-contained function. The spinneret is only a metalic cap with microscopic holes through which the spinning machines are passed. Spinning pot is merely a container for collecting the raw yarn. The gear pumps consist essentially of a pair precision cut gears holding the squeezes the viscose out to the spinneret. As such, he submits that as the items are admittedly the parts of the machineries, they would not be hit by the Exclusion Clause in view of the Larger Bench decision and the appellants would be entitled to the benefit of Modvat credit on the same.

4. Countering the arguments, Shri J.M. Kennedy, Ld. JDR submitted that the authorities below have held that the items in question are used for years together till they become unusable. The Assistant Commissioner has observed that spinnerets are used for indefinite period and are replaceable and got recondition for use. As such, it cannot be said that they are re-placeable spares as was the case in the Larger Bench decision in Union Carbide. He also drew my attention to the observations of the Assistant Commissioner that now the appellants have claimed the Modvat credit on the said items as capital goods, which fact shows that the appellants themselves were considering the goods in question to be capital goods.

5. After giving my careful consideration to the submissions made from both the sides, I find that the legal position as regards the extention of Modvat credit to the parts and spares of machines or machineries is no longer res-integra having been decided in the case of Union Carbide India Ltd. and confirmed by the Honble High Court of Patna. The factual position as regards the goods in question being parts or not has to be appreciated. From the detailed use and function of the items given by the appellants and not rebutted by the Department, it is seen that the items in question are not of the type as performing any independent and self-contained function. It is also a fact that the said parts get damage during their use and need frequent replacement. I also find force in the submissions of the Ld. Advocate that the Department has sought to deny, the Modvat credit by treating the said goods as parts of machines or machineries. As such, they cannot go back on their own claim, as the parts are admittedly entitled to Modvat credit not being hit by the Exclusion Clause of Rule 57A as held by Larger Bench decision of the Tribunal. I hold that the said items are entitled to Modvat credit Under Rule 57A. Accordingly, I allow the appeal with consequential relief to the appellants.