SARASWATI SUGAR MILLSversusCOMMISSIONER OF CENTRAL EXCISE, DELHI-ILL

               [2011] 13 (ADDL.) S.C.R. 579


               SARASWATI SUGAR MILLS                          A
                             v.
    COMMISSIONER OF CENTRAL EXCISE, DELHI-Ill
           (Civil Appeal No.5295 of 2003)

                    AUGUST 02, 2011
                                                              B
            [D.K. JAIN AND H.L. DATTU, JJ.j

      Central Excise Rules, 1944 - Rule 570 - Exemption
Notification No.6711995-CE dated 16.03.1995 exempted duly
in respect of "capital goods", as defined in Rule 570 if they C
were manufactured in a factory and used within the factory of
production - Assessee-appellant, manufacturer of Sugar and
Molasses, fabricated Iron and Steel structures in its factory
and captively used them within the factory for installation and
effective functioning of sugar manufacturing machineries D
falling under item nos. 2 and 3 of the table to Rule 570 -
Whether the Iron and Steel structures were in the nature of
components of the said sugar manufacturing machineries
and therefore, required to be treated as capital goods falling
under item no.5 of the table to Rule 570 and consequently E
exempt from payment of excise duty by virtue of Notification
No.6711995-CE dated 16.03.1995 - He(d: Anything required
to make the goods a finished item can be described as a
component part - If an article is an element in the
composition of another article made out of it, such an article F
may be described as a component of another article - For
the purpose of manufacturing cane sugar in a sugar industry,
the essential machineries that are required are sugar presses,
diffusers, vaccum pans, evaporators and sugar handling
equipments, crystallizers, sugar grader, elevator and cooling G
tower - The iron and steel structures in question were not
essential requirements in the sugar manufacturing unit and
did not satisfy description of 'compbnents' of the machineries
used in the installation of Sugar Manufacturing Plant -
                            579                               H
     580    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.


A    Assessee therefore not entitled to benefit of the said
     Exemption Notification - Central Excise Tariff Act, 1985 -
     Chapter Heading 73 of the Schedule.

           Notification - Exemption Notification - Interpretation of
     - Held. Since exemption notifications are issued under
8
     delegated legislative power, they have full statutory force - An
     exemption .notification has to be strictly construed - The
     conditions for taking benefit under the notification are also to
     be strictly interpreted - When the wordings of notification is
C    clear, then the plain language of the notification must be given
     effect to - By way of an interpretation or construction, the Court
     cannot add or substitute any word while construing the
     notification either to grant or deny exemption - The Courts
     are a/so not expected to stretch the words of notification or add
     or subtract words in order to grant or deny the benefit of
D    exemption notification.

          Interpretation of statutes - Rules framed under the
     Statute - Interpretation of - Held: Th ~Y should be read as a
     part of the Statute itself and require to be interpreted as intra
E'   vires to the Act under which they have been issued.

        Words and Phrases - "Component" - Meaning of - Held:
  In order to determine whether a particular article is a
  component part of another article, the correct test would be
  to look both althe article which is said to be component part
F and the completed article and then come to a conclusion
  whether the first article is a component part of the whole or
  not - One must first look at the article itself and consider what
  its uses are and whether its only use or its primary or ordinary
  use is as the component part of another article - In common
G parlance, components are items or parts which are used in
  the manufacture of the final product and without which, final
  product cannot be conc;eived of

      The assessee-appellant is a manufacturer of Sugar
H and Molasses. It was availing MODVAT credit facility on
SARASWATI SUGAR MILLS v. COMMISSIONER OF 581
        CENTRAL EXCISE, DELHI-Ill
the excise duty paid for the capital goods used in the A
factory for manufacturing process under Rule 57Q of the
r.entral Excise Rules, 1944. However, certain machineries
like cane milling plant, clarification plant, evaporator and
pan boiling plant, power generation plant etc., which are
specified as capital goods in terms of Serial Nos. 2 and B
3 of the Table below Sub-Rule 1 of Rule 57Q of the Rules,
required the support of structural items for their
installation. In view of this, the assessee started
manufacturing iron and steel structures for installation of
the said machineries. Thereafter, the assessee filed c
declaration under Rule 57Q of the Rules declaring Iron
and Steel structures under sub-heading 7308.90 of
Chapter 73 as capital goods and claiming exemption
under the Notification No. 67/95-CE dated 16.03.1995. The
$aid Notification exempted capital goods, as defined in 0
Rule 57Q of the Rules, manufactured and used within the
factory from the excise duty leviable on such goods as
specified in the schedule to the Central Excise Tariff Act,
1985.

     However, the Assistant Commissioner, Cent_ral E
Excise levied excise duty upon the assessee-appellant
and imposed penalty of Rs.5,00,000/- on ground that the
Notification was not applicable to the said Iron and Steel
structures. The Commissioner (Appeals) upheld the order
of the Assistant Commissioner. The Tribunal affirmed the F
demand of duty on the ground that Chapter 73 of
Schedule to the Tariff, Act under which the said Iron and
Steel structures fall, was not specified in the Table below
Rule 57Q of the Rules and the machineries purchased by
the assessee were complete in itself, but reduced the G
amount of-penalty to Rs.1,00,000/-.

    In the instant appeals, the appellant contended that
the Iron and Steel structures fabricated and captively
used by it were in the nature of components of the sugar H
    582     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A manufacturing plant and therefore, the said structures
    were capital goods in terms of Serial no. 5 of the Rule 57Q
    of the Rules and consequently exempt from payment of
    excise duty by virtue of Notification No.67/1995-CE dated
    16.03.1995.
B
          Dismissing the appeal, the Court

        HELD: 1. The Central Excise Tariff Act, 1985
   prescribes the rate of duty for each chapter head and
   sub-head. The Tariff Act has authorized the Central Govt.
C to modify the rates/duty by issuing notifications. Since
   exemption notifications are issued under delegated
   legislative power, they have full statutory force. The
   Notification No.67/95-CE dated 16.03.1995 specifically
  exempts capital goods as defined in Rule 57Q of the
D Central Excise Rules, 1944. The other condition that is
  envisaged in the Notification is that the 'capital goods'
  should be manufactured in a factory and used within the
  factory of production. If these twin conditions are
  satisfied, the capital goods are exempt from payment of
E excise duty. A party claiming exemption has to prove that
  he/it is eligible for exemption contained in the notification.
  An exemption notification has to be strictly construed.
  The conditions for taking benefit under the notification are
  also to be strictly interpreted. When the wordings of
F notification is clear, then the plain language of the
  notification must be given effect to. By way of an
  interpretation or construction, the Court cannot add or
  substitute any word while construing the notification
  either to grant or deny exemption. The Courts are also
G not expected to stretch the words of notification or add
  or subtract words in order to grant or deny the benefit of
  exemption notification. [Para 7) [594-F-H; 595-A-D]

          Bombay Chemicals (P) Ltd. vs. CCE (1995) Supp (2)
    SCC 646: 1995 (3) SCR 369 - relied on.
H
 SARASWATI SUGAR MILLS v. COMMISSIONER OF 583
         CENTRAL EXCISE, DELHI-Ill

     2. While interpreting the Rules, which are framed            A
under the Statute, they should be read as a part of the
Statute itself and require to be interpreted as intra vires
to the Act under which they have been issued. [Para 8)
[595-E]
                                                                  B
     3. The expression "components" is not defined
under the Act. Therefore, reference can be made to
dictionaries to understand the meaning of the expression
"components". In order to determine whether a particular
article is a component part of another article, the correct
test would be to look both at the article which is said to C
be component part and the completed article and then
come to a conclusion whether the first article is a
component part of the whole or not. One must first look
at the article itself and consider what its uses are and
whether its only use or its primary or ordinary use is as D
the component part of another article. There cannot
possibly be any serious dispute that in common parlance,
components are items or parts which are used in the
manufacture of the final product and without which, final
product cannot be conceived of. [Paras 10, 11, 12) [596- E
E; 597-C-F]

    Star Paper Mills v. Collector of Central Excise (1989) 4
SCC 724: 1989 (3) SCR 892; CCE v. Allied Aid Conditioning
Corporation 2006 (202) ELT 209 (SC); Modi Rubber Ltd. v.          F
Union of India, (1997) 7 SCC 13: 1997 (3) Suppl. SCR 519
and Hindustan Sanitaryware & Industries Ltd. & Lakshmi
Cement v. Collector of Customs (2000) 10 SCC 224 -
referred to.

    Webster Comprehensive dictionary; Oxford Advanced             G
Learner's Dictionary, Volume 1, International Edition; Advanced
Law Lexicon, 3rd Edition 2005, (by P. Ramanatha Aiyar)
and Encyclopaedic Law Lexicon, Volume 2008-09 Edition,
by Justice C.K. Thakkar - referred to.
                                                                  H
    584   SUPREME COUR;r REPORTS (2011] 13 (ADDL.) S.C.R.


A       4. The process of making sugar commences from
   the stage of collecting the harvest, cleansing and
   grinding, juicing, clarifying, evaporation, crystallization,
   refining and lastly separation and packing. For the
   purpose of manufacturing cane sugar in a sugar
8 industry, the essential machineries that are required are
   sugar presses, diffusers, vaccum pans, evaporators and
   sugar handling equipments, crystallizers, sugar grader,
   elevator and cooling tower. Under the Notification, the
  Central Government had exempted duty in respect of
C "capital goods", as defined in Rule 57 Q of the Rules if
  they were utilized in a place where such goods were
  manufactured and used within the factory of production.
  The Notification specifically states that what is exempted
  under the Notification are "capital goods" as defined in
  Rule 57Q. Rule 57Q specifies five categories of items as
0 capital goods. It is not the case of the assessee or its
  counsel that the exemption claimed was on Items 1 to 4
  of the Table to Rule 57Q but as components which would
  fall under item No.5 of the Table to Rule 57Q. Therefore,
  in order to get the benefit of non excise duty on Iron and
E Steel Structures, it had to be established by the
  assessee that Iron and Steel Structures were utilized as
  component parts for the finished products, viz. vacuum
  pan, crystallizers, sugar grader, elevator, cooling tower
  etc. [Para 18] [599-G-H; 600-A·E]
F
    ANALYSIS AND CONCLUSION :

       5.1. It appears, in the light of the meaning of the
  expression 'component parts' that the iron and steel
  structures are not essential requirements in the sugar
G manufacturing unit. Anything required to make the goods
  a finished item can be described as component parts.
  Iron and Steel structures would not go into the
  composition of vacuum pans, crystallizers etc. If an
  article is an element in the composition of another article
H made out of it, such an article may be described as a
SARASWATI SUGAR MILLS v. COMMISSIONER OF 585
        CENTRAL EXCISE. DELHI-Ill
component of another article. Thus, structures in              A
question do not satisfy description of 'components'.
Therefore, the Tribunal was right in the view it took. [Para
19] [600-F-G]

     5.2. The further contention canvassed by the              8
appellant that the Tribunal was not correct in holding that
the assessee failed to establish that the steel structures
were components of the capital goods as specified in the
Table below Rule 57Q of the Rules and, therefore, not
eligible for exemption under the notification, requires to     C
be answered with reference to Circular No. 276/110/96-
TRV dated 02.12.1996 issued by the Central Board of
Excise and Customs (CBEC). The period in dispute is
July 1999 to September 1999. The Circular is dated
02.12.1996. Therefore, it was applicable to the disputed
period. The Circular provides that all parts, components,      0
accessories, which are to be used with the capital goods
of Clauses (a) to (c) of Explanation (1) of Rule 57Q and
classifiable under any Chapter heading are eligible for
availing of MODVAT Credit. However, while denying
exemption under the notification, the Tribunal concluded       E
that the goods in question, which comes under Chapter
Heading 73 of the Tariff Act has not been specified in the
table below rule 57Q. There is no fault with the reasoning
of the Tribunal, since the Circular, on which reliance is
now placed by the appellant, was not produced before           F
the Tribunal and, therefore, going by the language
employed in Rule 57Q, there is justification for the
Tribunal for coming to the aforesaid conclusion. In view
of the circular, which is now brought to the notice of this
Court, the Tribunal was not correct to reject the claim of     G
the assessee on the aforesaid ground. However, this
finding will not assist the assessee, since Iron and Steel
structures are not the components of machineries used
in the installation of Sugar Manufacturing Plant. [Paras
21, 22] [601-C-D; 602-C-G]                                     H
    586     SUPREME COURT REPORTS (2011] 13 (ADDL) S.C.R.


A       Simbhaoli Sugar Mills Ltd. V Commissioner of Centra,
    2001 (135) E.L.T. 1239 (Tri.-Del) - not approved.

        CCE vs. Rajasthan Spinning and Weaving Mills Ltd.
    (2010) 255 ELT 481 (SC) - referred to.
B
                          Case Law Reference:

     1995 (3) SCR 369                 relied on         Para 7

     1989 (3) SCR 892                 relied on         Para 11

c    2006 (202) ELT 209 (SC)          relied on         Para 11

     1997 (3) Suppl. SCR 519          relied on         Para 15

     (2000) 10 sec 224                relied on         Para 16

     (2010) 255 ELT 481 (SC)          referred to       Para 23
D
     2001 (135) ELT 1239 (Tri-Del) referred to          Para 25

        CIVIL APPELLATE JURISDICTION: Civil Appeal 5295 of
    2003.
E       From the Judgment & Order dated 10.12.2002 of the
    Custom Excise & Gold (Control) Appellate Tribunal, New Delhi
    in Appeal No. E/186/2002-B.

        V. Lakshmi Kumaran, Alok Yadav, Rajesh Kumar for the
F   Appellant.

          K. Swami, Binu Tamta, B.K. Prasad for the Respondent.

          The Judgment of the Court was delivered by

G         H. L. DATTU, J. 1. This appeal is directed against the
    final Order of the Customs Excise and Gold (Control) Appellate
    Tribunal, New Delhi [hereinafter referred to as 'the Tribunal')
    dated 10.12.2002. By the impugned order, the Tribunal has
    confirmed the order passed by the Commissioner of Central
H   Excise (Appeals), which has affirmed the order of the Assistant
 SARASWATI SUGAR MILLS v. COMMISSIONER OF 587
   CENTRAL EXCISE, DELHI-Ill [H.L DATTU, J.]

Commissioner of Central Excise, levying the duty and penalty         A
under the Central Excise Act, 1944 (hereinafter referred to as
'the Act').

THE ISSUE:

     2. The bone of contention between the Appellant-assessee        8
[hereinafter referred to as 'the assessee'] and the Respondent
[hereinafter referred to as 'the Revenue'] can be crystallized
thus: Whether the Iron and Steel structures manufactured and
used captively in the factory for installation of the Sugar
manufacturing plant by the assessee can be classified c.s            C
capital goods under Rule 570 of the Central Excise Rules, 1944
[hereinafter referred to as "the Rules"].

THE FACTS :

      3. The relevant facts for the purpose of this appeal are:- D
The assessee is the manufacturer of Sugar and Molasses. The
assessee is availing MODVAT credit facility on the excise duty
paid for the capital goods used in the factory for manufacturing
process under Rule 570 of the Rules. In April 1999, the
assessee, in order to modernize the manufacturing process of E
sugar and molassess, has installed new machineries by
replacing the old one. However, certain machineries like cane
milling plant, clarification plant, evaporator and pan boiling plant,
power generation plant etc., which are specified as capital
goods in terms of Serial Nos. 2 and 3 of the Table below Sub- F
Rule 1 of Rule 570 of the Rules, required the support of
structural items for their installation. In view of this, the assessee .
started the manufacturing of iron and steel structures, after
purchasing excise duty paid iron and steel sheets, angles, nuts
and bolts etc. for the installation of the said machineries. G
Thereafter, the assessee has filed a declaration under Rule 570
of the Rules declaring Iron and Steel structures under sub-
heading 7308.90 of Chapter 73 as capital goods. The
assessee has also filed classification declaration under Rule
1738 of the Rules dated 09.07.1999 for the Iron and Steel H
    588    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C.R.


A structures classifying it under sub-heading 7308.90 of Chapter
  73 and claiming exemption under the Notification No. 67/95-
  CE dated 16.03.1995 [hereinafter referred to as "Notification"].
  The said Notification exempts the capital goods, as defined in
  Rule 570 of the Rules. manufactured and used within the factory
B from the excise duty leviable on such goods as specified in the
  schedule to the Central Excise Tariff Act, 1985 [hereinafter
  referred to as "the Tariff Act"]. Subsequently. the Assistant
  Commissioner. Central Excise Division, Ambala vide Office
  letter dated 20.01.2000 has issued a Show Cause Notice to
c the assessee for short payment of excise duty to the tune of
  Rs. 28, 14,464/- for the period July, 1999 to September. 1999
  as Notification is not applicable to the iron and steel structures.
  The said Show Cause Notice was replied by the assessee vide
  its reply dated 24.02.2000 claiming the benefit of Exemption
  Notification. The assessee has also produced various
0
  photographs, drawings and Certificate of the Chartered
  Engineers during the personal h-:aring before the Assistant
  Commissioner dated 21 .03.2000 in order to show that the iron
  and steel structures are components of machinery and
  quintessential for its effective functioning. However, the
E Assistant Commissioner, vide its order dated 31.03.2000,
  confirmed the duty demand and imposed a penalty of Rs.
  5,00,000/- on the ground that the Notification is not applicable
  to the said Iron and Steel structures as they are neither inputs
  used in relation to the manufacture of final product nor capital
F goods as defined in Column 2 of the Table given below Sub-
  Rule (1) of Rule 570 of the Rules. The assessee, aggrieved
  by the order of Assistant Commissioner, preferred an appeal
  before the Commissioner of Central Excise (Appeals). The
  Commissioner (Appeals), vide its order dated 23.11.2011,
G confirmed the order of the Assistant Commissioner and
  rejected the appeal on the ground that the said Iron and Steel
  structures form the part of the building. Being aggrieved, the
  assessee preferred an appeal before the Tribunal, the same
  was partly allowed. The Tribunal, vide its impugned order dated
H 10.12.2002, reduced the amount of penalty to Rs.1,00,000/- and
 SARASWATI SUGAR MILLS v. COMMISSIONER OF 589
   CENTRAL EXCISE, DELHI-Ill [H.L. DATTU, J.]
affirmed the demand of duty on the ground that Chapter 73 of A
Schedule to the Tariff, Act under which the said Iron and Steel
structures fall, has not been specified in the Table below Rule
570 of the Rules and the machineries purchased by the
assessee were complete in itself. The reasoning of the Tribunal
is as under:                                                    B
    "We have considered the submission of both the sides.
    The Ld. Advocate had shown us certain photographs
    where the impugned structures were used. According to
    him these structures form integral part of the machinery
    concerned without which the machinery cannot function.        C
    On query from the Bench, the Ld. Advocate has fairly
    conceded that the various machineries, which have been
    purchased by them, were complete. Accordingly, we do
    not find any substance in his submissions that these
    structures are components of the various machine/             D
    machineries. Notification No. 67195-CE provides
    exemption from payment of duty to the capital goods as
    defined in Rule 57Q if they are used in or in relation to
    the final products which are chargeable to duty. The
    appellants have not succeeded in establishing that the        E
    impugned structures are components of the capital goods
    as specified in the table below Rule 570 of the Central
    Excise Rules. Chapter 73 of the Central Excise Tariff
    under which the impugned goods fall has also not been
    specified in the table below Rule 570. The ratio of the       F
    decision in the case of Bhanu Steels is not applicable
    as therein the appellants had explained that the goods
    were spare parts for plant and machinery installed in their
    fact01y. In the present matter, the appellants have not
    proved that the impugned goods are components of the          G
    machines/machineries. The ratio of the decision in the
    case of Wainganga is not applicable as the goods were
    manufactured in t/Je factory and further these were not
    trusses, column and purlines as was the fact in the
    Wainganga case. We, therefore, hold that the benefit of       H
    590     SUPREME COURT REPORTS [2011] 13 (ADDL.) S C.R.


A         Notification No. 67195 is not available to the appellants.
          Accordingly, we uphold the demand of duty of Excise
          confirmed against them. However, taking into
          consideration the facts and circumstances of the case,
          we are of the view that the penalty imposed is on the
B         higher side and the interest of justice will be met, if the
          Appellants are directed to pay a penalty of only Rs. 1 lakh.
          We order accordingly. The appeal is thus partly allowed."

    THE COMPETING ARGUMENTS :
c          4. The learned counsel Shri. V. Lakshmi Kumaran submits
    ttrat the Iron and Steel structures are fabricated by the assessee
    in its factory and subsequently, used within the factory for
    installation and effective functioning of the sugar manufacturing
    machineries which falls under Serial NoS. 2 and 3 of the Table
0   to Rule 57Q as capital goods. The said Iron and Steel structures
    are in the nature of components of the sugar manufacturing
    plant. Therefore, the said structures are capital goods in terms
    of Serial no. 5 of the Rule 570 of the Rules. He further submits
    that the Tribunal has grossly erred in observing that Chapter 73
E   of Schedule to the Tariff Act, under which the said Iron and Steel
    structures fall, has not been specified in the table below Rule
    57Q of the Rules. In this regard, he contends that so long as
    the Iron and Steel Structures are used as component or
    accessory of the eligible machines falling under Serial No. 2
    and 3, irrespective of its classification under the Tariff Act, it
F   would be treated as capital goods as covered by Serial No. 5
    of the table below Rule 57Q. In support of this argument, the
    learned counsel, placing reliance on the Circular dated
    02.12.1996, issued by Central Board of Excise and Customs
    [hereinafter referred to as "the CBEC"), submits that the
G   components, spares and accessories to the eligible capital
    goods under Rule 570 have been specified as capital goods
    on the basis of their description, instead of classification under
    the Tariff Act. He further submits that the said Iron and Steel
    structures, once used for the installation of various machineries,
H   become part and parcel of the sugar manufacturing plftnt and
     SARASWATI SUGAR MILLS v. COMMISSIONER OF                    591
       CENTRAL EXCISE, DELHI-Ill [H.L. DATTU, J.]
    without the help of said structures, the machineries cannot be A
    installed and made functional. In other words, the said structures
    are also in the nature of components to the sugar manufacturing
    plant. He also submits, by placing reliance on Sectiori 1Note 5
    to Section XVI of the Tariff Act, that the expression 'machine'
    has to be construed as plant and any component of the B
    machine, being part of the machine, will also become part of
    the plant. He further submits that this Court in Commissioner
    of Central Excise, Jaipur v. Rajasthan Spinning and Weaving
    Mills Ltd., 2010 (255) E.L.T. 481 (SC) held that the steel plates
    and M.S. Channels, used in the fabrication of chimney, which C
    is integral part of the diesel generating set, are capital goods
•   in terms of Serial No. 5 of the Table below Rule 57Q the Rules.
     In other words, the individual items used for fabricating the
     component of the eligible capital goods under Serial Nos. 2
     and 3, are qualified as capital goods in terms of Serial No. 5 D
     of the Table below Rule 57Q of the Rules. The learned counsel,
     citing the decision of the Tribunal in Simbhao/i Sugar Mills Ltd.
      V. Commissioner of Central, 2001 (135) E.L.T. 1239 (Tri.-Del),
     submits that the said decision deals with exactly the same
     Structural Items, under Chapter heading 73.08, which are in
     issue before this Court and used for installation of Sugar E
     Manufacturing Plant. He further submits that on issue of whether
     the Iron and Steel items fabricated at site for raising the structure
     to support the sugar manufacturing plant are capital goods or
     not under Rule 57Q, the Tribunal answered that items used for
     fabricating the structures, which are in the nature of components F
     or part of the machines, are also capital goods in terms of Rule
     57Q and allowed MODVAT credit on the said items. He further
    submits that the Special Leave Petition against this decision
     of Tribunal, preferred by the Revenue, has been dismissed by
    this Court. Drawing strength from the above decisions of this G
     Court and the Tribunal, the learned counsel submits that the
    assessee is better placed as the iron and steel structures in
    issue form the integral and quintessential part of the Sugar.
    manufacturing Plant and the whole machinery is so designed
    that without the said Iron and Steel structures, the sugar plant H
    592     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A    cannot function. He further submits that when individual items
     used for fabricating the structures in the nature of components
     to support the machinery are treated as capital goods in terms
    of Rule 570, then it will be against logic to say that structures
     are not components of the machines. The learned counsel
B    submits, by referring to a circular dated 05. 08.1997 issued by
    the CBEC, that in case of a Wind Mill, the tower acting as a
    structure to support the Wind Mill constitutes an essential
    component of the Wind Mill. Therefore, the support tower can
    be treated as capital goods and the assessee can claim
    exemption, if provided. Drawing an analogy from the example
C   of Wind Mill, the learned counsel submits that the Iron and Steel
    structures are the components or parts of the Sugar
    manufacturing plant and qualify as capital goods in terms of
    Serial No. 5 of the Table below Rule 57Q of the Rules.
    Arguendo, the learned counsel submits that the Iron and Steel
D   structures are fabricated at the site of work for use in the
    construction or erection of the various machineries, therefore,
    can be classified under sub-heading 7308.50 under Chapter
    73 of the Schedule to the Tariff Act which attracts Nil rate of duty.
    Alternatively, the learned counsel submits, by placing reliance
E   on the judgment of this Court in Commissioner of Central
    Excise v. Wainganga Sahkari S. Karkhana Ltd., 2002 (142)
    ELT 12 (SC), that no excise duty is payable on structural items
    fabricated at site and used within the site.

F      5. Per contra, Shri. K. Swami, learned counsel for the
  Revenue, supports the findings and conclusion reached by the
  Tribunal and the department. He further submits that the Iron and
  Steel structures which fall under Chapter Heading 73 of the
  Schedule to the Tariff Act, is neither mentioned in the Notification
G nor in the Table below Rule 570 of the Rules. According to
  learned counsel, the Exemption Notification only exempts the
  capital goods as defined in Rule 570 of the Rules. The learned
  counsel also argues that by applying "user test" theory, the Iron
  and Steel structures cannot be considered as components of
H
 SARASWATI SUGAR MILLS v. COMMISSIONER OF 593
   CENTRAL EXCISE, DELHI-Ill [H.L. DATTU, J.]
the sugar manufacturing plant. It is also submitted that the         A
Notification requires to be strictly construed and since the
assessee does not fall within the ambit of the Notification, it is
not entitled for the benefit of the Notification.

THE NOTIFICATION :
                                                                     B
     6. To resolve the controversy, we need to notice the relevant
Notification and Rule 570 of the Rules. The relevant portion of
Notification No.67195-CE dated 16.03.1995 is as under:-

           "In exercise of the powers conferred by sub-section       c
     (1) of Section SA of the Central Excise Act, 1944 ... the
     Central Government being satisfied that it is necessary in
     the public interest so to do hereby exempts

     (i) capital goods as defined in Rule 570 of the Central
     Excise Rules 1944 manufactured in a factory and used            D
     within the factory of production;

     (ii) ...

     from the whole of the duty of excise leviable thereon which     E
     is specified in the Schedule to the Central Excise Tariff
     Act, 1985 (5 of 1986)."

THE RULES:

     Rule 570 of the Central Excise Rules, 1944 reads:-              F

                      "(1) All goods falling under heading
                      Nos.82.02 to 82.11;

                (2)   All goods falling under Chapter 84 (other than
                      internal combustion engines falling under G
                      heading No.84.07 and 84.08 and of a kind
                      used in motor vehicles, compressors falling
                      under heading No.84.14 and of a kind used
                      in refrigerating and air-conditioning
                      appliances and machinery, heading or sub- H
    594    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A                      heading Nos.84.15. 85. 18, 8422 .10,
                       8424.10, fire extinguishers falling under sub-
                       heading No.8424.80, 8424.91, 8424.99,
                       84.29 to 84.37, 8440, 84.50, 8452, 84.69 to
                       84.73, 84.76, 84.78, expansion valves and
B                      solenoid valves falling under sub-heading
                       No.8481.10 of a kind used for refrigerating
                       and air-conditioning appliances and
                       machinery);

                 (3)   All goods falling under Chapter 85 (other than
c                      those falling under heading Nos.85.09 to
                       85.13, 85.16 to 85.31 and 85.40);

                 (4)    All goods falling under heading Nos.90.11
                       to 90.13, 90.16, 90.17, 98.22 (other than for
D                      medical use), 90.24 to 90.31 and 90.32
                       (other than of a kind used for refrigeration
                       and air-conditioning appliances and
                       machinery);

                 (5)    Components, spares and accessories of
E
                       the goods specified against S. Nos. 1 to 4
                       above.'

    ANALYSIS OF THIS MATERIAL:

F        7. The Tariff Act prescribes the rate of duty for each
    chapter head and sub-head. The Tariff Act has authorized the
    Central Govt. to modify the rates/duty by issuing notifications.
    Since exemption notifications are issued under. delegated
    legislative power, they have full statutory force. The Notification
G   No.67/95-CE dated 16.03.1995 specifically exempts capital
    goods as defined in Rule 570 of the Rules. The other condition
    that is envisaged in the Notification is that the 'capital goods'
    should be manufactured in a factory and used within the factory
    of production. If these twin conditions are satisfied, the capital
H   goods are exempt from payment of excise duty. A party
 SARASWATI SUGAR MILLS v. COMMISSIONER OF 595
   CENTRAL EXCISE, bELHl-111 [H.L. DATTU, J.]
claiming exemption has to prove that he/it is eligible for A
exemption contained in the notification. An exemption
notification has to be strictly construed. The conditions for
taking benefit under the notification are also to be strictly
interpreted. When the wordings of notification is clear, then the
plain language of the notification must be given effect to. By B
way of an interpretation or construction, the Court cannot add
or substitute any word while construing the notification either
to grant or deny exemption. The Courts are also not expected
to stretch the words of notification or add or subtract words in
order to grant or deny the benefit of exemption notification. In C
 Bombay Chemicals (P) Ltd. vs. CCE - (1995) Supp (2) SCC
646, a three Judge Bench of this Court held that an exemption
notification should be construed strictly, but once an article is
found to satisfy the test by which it falls in the notification, then
 it cannot be excluded from it by construing such notification
                                                                      0
narrowly.

     8. Now coming to Rule 570 of the Rules, these rules are
framed under the Statute. While interpreting the Rules, which
are framed under the Statute, they should be read as a part of
the Statute itself and require to be interpreted as intra vires to   E
the Act under which they have been issued.

     Having said that, now let us consider the submission of
learned counsel Shri Lakshmikumaran for the assessee who
contends that Iron and Steel structurals manufactured by the F
assessee within its factory used for the purpose of installation
of sugar manufacturing plant are components of the capital
goods and therefore, exempt from payment of excise duty by
virtue of Notification No.67/1995-CE dated 16.03.1995.
However, Shri Swami, learned counsel for the Revenue G
contends that the items in dispute are independent goods
manufactured by the assessee, though in its factory from the
goods on which excise duty is paid cannot be construed as.
component parts of sugar manufacturing plant and therefore,
is not entitled for the benefit of Notification No.67/1995 dated
                                                                 H
16.03.1995.
     596    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A        9. As per Notification No.67/1995 dated 16.03.1995,
   capital goods as defined in Rule 57Q of the Rules manufactured
   in a factory and used within the factory of production are exempt
   from payment of Excise Duty. Rule 57Q of the Rules, specifies
   various items of goods falling under different chapter headings
B and sub-headings of the Tariff Act as capital goods. It is not the
   case of the assessee that Iron and Steel Structures
   manufactured by it in its factory are the goods which fall under
   Items 1 to 4 of Rule 57Q, though sugar manufacturing unit would
  fall under Item Nos. 2 and 3 of the Table to Rule 57Q of the
c Rules. It is the specific stand of the assessee that the goods in
  dispute are components of the goods specified in Items 2 and
   3 of the Table to Rule 570 of the Rules and since the capital
  goods include components and accessories, the Iron and Steel
   Structures manufactured within the factory are exempt from
  excise duty.
0
         10. The expression "components" is not defined under the
  Act. Therefore, reference can be made to dictionaries to
   understand the meaning of the expression "components". In
  Webster Comprehensive dictionary, it is defined as
E 'Constituent parf. In Oxford Advanced Learner's Dictionary,
  Volume 1, International Edition, the word "component" means
  a 'constituent part'. Further, 'constituent' means 'serving to form
  or compose as a necessary part'. In Advanced Law Lexicon,
  3rd Edition 2005, (by P. Ramanatha Aiyar), the word
F 'component part' is defined as 'something which becomes an
  integral part of the goods in question by losing its physical and
  economic distinctiveness'. It defines 'constituent' (of a
  component) as 'that helps make up or complete a unit or a
  who/e's one part of something that makes up a whole'.
G Encyclopaedic Law Lexicon, Volume 2008-09 Edition, by
  Justice C.K. Thakkar, describes the 'components' as : 'It
  appears, therefore, that for an article to be called a component
  part, it is not necessary that even it becomes part of another
  article, it should still retain its identity. All that is necessary to
H make an article, a component part is that it goes in to the
 SARASWATI SUGAR MILLS v. COMMISSIONER OF 597
   CENTRAL EXCISE, DELHI-Ill [H.L. DATTU, J.]
composition of another article. If an article is an element in the    A
composition of another article made out of it, such an article
may well be described as a component part of another article.
It may be that the final product made may be in the nature of a
compound in which case, the elements forming component
parts may not be capable of any more separate identification.         8
Equally, it may be that when a machinery is assembled out of
several parts forming that machinery, those machinery, those
parts, even after there being filled may retain their individuality
or identity'.

     11. The meaning of the expression 'components' as C
defined in the dictionary is accepted and adopted by this Court
in the case of Star Paper Mills Vs. Collector of Central Excise
(1989) 4 sec 724 and the same is quoted with approval in
CCE Vs. Allied Aid Conditioning Corporation 2006 (202) ELT
209 (SC).                                                       D

      12. In order to determine whether a particular article is a
component part of another article, the correct test would be to
look both at the article which is said to be component part and
the completed article and then come to a conclusion whether           E
the first article is a component part of the whole or not. One
must first look at the article itself and consider what its uses
are and whether its only use or its primary or ordinary use is
as the component part of another article. There cannot possibly
be any serious dispute that in common parlance, components
                                                                      F
are items or parts which are used in the manufacture of the final
product and without which, final product cannot be conceived
of.

      13. The meaning of the expression 'componenf in common
parlance is that 'component part of an article is an integral part    G
necessary to the constitution of the whole article and without
it, the article will not be complete'.

      14. This Court, in Star Paper Mills (supra) has made a
settled distinction while considering whether paper cores are         H
    598     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.

A ·components' in the manufacture of paper rolls and manufacture
  of paper sheets. It is stated that 'paper cores' are component
  parts in so far as manufacture of roll is concerned, but it is not
  'component part' in the manufacture of sheets. It is useful to
  quote the observations made by this Court :-
B       "... paper core would also be constituent part of paper and
  would thus fall within the term "component parts" used in the
  Notification in so far as manufacture of paper in rolls is
  concerned. Paper core, however, cannot be said to be used
  in the manufacture of paper in sheets as component part. We
C are conscious that the relevant tariff item uses the word "paper''
  but since paper in rolls and paper in sheets are nothing but
  different forms of paper, both of them would be excisable goods
  as paper under the relevant tariff item."

D      15. In Modi Rubber Ltd. v. Union of India, (1997) 7 SCC
  13, the appellant had set up tyre and tube manufacturing plant
  and imported various plants and machineries. While using the
  plants and machineries, PPLF (Polypropylene Liner Fabric)
  was used as a device in the form of liner components to various
E machinery units to protect the rubber-coated tyre fabric from
  atmospheric moisture and dust. This Court held that the PPLF
  was not a component of the machine itself. It was not a
  constituent part. It was used as a Liner Fabric not only in tyre
  production but also in similar other industrial processes.
F        16. In Hindustan Sanitaryware & Industries Ltd. &
    Lakshmi Cement v. Collector of Customs, (2000) 10 SCC
    224, this Court while drawing a distinction between component
    and spare parts observed:

G         "It pertains to the meaning of the phrase "component
          parts". The Tribunal, in the impugned order, drew a
          distinction between component parts and spare parts,
          following its earlier decision in the case of Vaz Forwarding
          (P) Ltd. v. Collector of Customsl. Component parts,
H         according to it, were those which were initially used in the
SARASWATI SUGAR MILLS v. COMMISSIONER OF 599
  CENTRAL EXCISE. DELHI-Ill [H.L. DATTU. J]
    assembly or manufacture of a machine and spare parts A
    were those parts which were used for the subsequent
    replacement therein of worn-out parts. The decision in Vaz
    Forwarding (P) Ltd.1 and other decisions of the Tribunal
    were considered by a larger Bench of the Tribunal in Jindal
    Strips Ltd. v. Collector of Customs<. The larger Bench took B
    the view that a spare part was a replacement part to
    replace a damaged or worn-out component but it was,
    nevertheless, a component part "Component" was the
    genus and "spare" was a species thereof; it was a
    component which was used for replacement. The larger C
    Bench judgment found that the distinction drawn in Vaz
     Forwarding (P) Ltd.1 was a distinction without a difference.

    2. The larger Bench decision followed decisions of this
    Court, and we are of the view that its view is correct A
    spare part, though fitted into a machine subsequent to its      D
    manufacture, to replace a defective or worn-out part
    becomes a component of the machine. It is a component
    part."

    17. The issue for our consideration, as we have already         E
noticed, is whether the Iron and Steel Structures are components
of the Capital Goods specified in the Table below Rule 570 of
the Rules. This issue can be resolved by looking into the
literature which gives some glimpse how sugar is manufactured
in a sugar industry and what is the essential machinery for
                                                                    F
manufacture of sugar.

     18. The process of making sugar commences from the
stage of collecting the harvest, cleansing and grinding, juicing,
clarifying, evaporation, crystallization, refining and lastly
separation and packing. For the purpose of manufacturing cane       G
sugar in a sugar industry, the essential machineries that are
required are sugar presses, diffusers, vaccum pans,
evaporators and sugar handling equipments, crystallizers,
sugar grader, elevator and cooling tower. We can call these
                                                                    H
    600    SUPREME COURT REPORTS [2011] 13 (ADDL) S.C R


A machineries as essential items in a sugar manufacturing plant.
   The assessee also fabricates Iron and Steel Structures for
   installation of the aforementioned equipments. Even according
   to learned senior counsel Sri Lakshmikumaran. these Iron and
   Steel Structures are used for effective functioning of Sugar
B Manufacturing Plant. Under the Notification, the Central
   Government had exempted duty in respect of "capital goods",
  as defined in Rule 57 0 of the Rules if they are utilized in a place
  where such goods are manufactured and used within the factory
  of production. The Notification specifically states that what is
c exempted under the Notification are "capital goods" as defined
  in Rule 570. Rule 570 specifies five categories of items as
  capital goods. It is not the case of the assessee or its learned
  counsel that the exemption claimed was on Items 1 to 4 of the
  Table to Rule 570 but as components which would fall under
  item No.5 of the Table to Rule 570. Therefore, in order to get
D the benefit of non excise duty on Iron and Steel Structures, it
  had to be established by the assessee that Iron and Steel
  Structures are utilized as component parts for the finished
  products, viz. vacuum pan, crystallizers. sugar grader, elevator,
  cooling tower etc.
E
    OUR ANALYSIS AND CONCLUSION :

       19. It appears to us, in the light of the meaning of the
  expression 'component parts' that the iron and steel structures
F are not essential requirements in the sugar manufacturing unit.
  Anything required to make the goods a finished item can be
  described as component parts. Iron and Steel structures would
  not go into the composition of vacuum pans. crystallizers etc. If
  an article is an element in the composition of another article
  made out of it, such an article may be described as a component
G of another article. Thus, structures in question do not satisfy
  description of'components'. Therefore, in our opinion, the
  Tribunal was right in the view it took.
      20. Sri V. Lakshmi Kumaran, learned senior counsel,
H submits that the Iron and Steel structures are fabricated at the
    602    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R


A         credit was available on components, spares and
          accessories of the specified capital goods irrespective of
          their classification.

          4. Accordingly, it is clarified that all parts, components,
8         accessories, which are to be used with capital goods of
          clauses (a) to (c) of Explanation (1) of Rule 570 and
          classifiable under any chapter heading are eligible for
          availment of Modvat credit."

        22. The period in dispute is July 1999 to September 1999.
C The Circular is dated 02.12.1996. Therefore, it was applicable
  to the disputed period. It is not disputed and it cannot be
  disputed that the Circular provides that all parts, components,
  accessories, which are to be used with the capital goods of
  Clauses (a) to (c) of Explanation (1) of Rule 570 and
D classifiable under any Chapter heading are eligible for availing
  of MODVAT Credit. However, while denying exemption under
  the notification, the Tribunal has concluded that the goods in
  question, which comes under Chapter Heading 73 of the Tariff
  Act has not been specified in the table below rule 570. We
E do not find fault with the reasoning of the Tribunal, since the
  Circular, on which reliance is now placed by the learned
  counsel, was not produced before the Tribunal and, therefore,
  going by the language employed in Rule 570, there is
  justification for the Tribunal for coming to the aforesaid
F conclusion. Since in view of the circular, which is now brought
  to our notice, the Tribunal was not correct to reject the claim of
  the assessee on the aforesaid ground. However, this finding
   of ours will not assist the assessee, since we have held that
   Iron and Steel structures are not the components of machineries
G used in the installation of Sugar Manufacturing Plant.

      23. Before we conclude, we must further observe that Shri
  Lakshmikumaran drew our attention to the judgment of this
  Court in CCE vs. Rajasthan Spinning and Weaving Mills Ltd.
  (2010) 255 ELT 481 (SC) where the appeal preferred by the
H Revenue is dismissed. The facts in the said case were that the
  SARASWATI SUGAR MILLS v. COMMISSIONER OF · 601
    CENTRAL EXCISE, DELHI-Ill [H.L. DATTU, J.]
site of the work for use in the construction of the various         A
machineries and, therefore, can be classified under sub-
heading 7308.50 under Chapter 73 of the Schedule to the Act,
which attracts nil rate of duty. Therefore, it is contended that
even if his other contention is not accepted, the assessee
should not be fastened with any duty liable under the Act. This     B
issue was neither raised nor canvassed by the assessee before
the Tribunal. Therefore, we cannot permit the learned counsel
to argue this issue before us for the first time. Therefore, this
contention of the learned counsel is rejected.

     21. Now coming to the last contention canvassed by the
                                                                    c
learned counsel that the Tribunal is not correct in holding that
the assessee failed to establish that the steel structures are
components of the capital goods as specified in the Table
below Rule 570 of the Rules and, therefore, are not eligible for
exemption under the notification. This issue requires to be         D
answered with reference to Circular No. 2761110196-TRV dated
02.12.1996 issued by the CBEC. The relevant portion of the
Circular is as under :-

   · "3. The matter has been examined. With effect from 23-         E
     7-1 996, capital goods eligible for credit under Rule 57Q
    have been specified either by their classification or by
    their description. Clauses (a) to (c) of Explanation (1) of
    the said rule cover capital goods by their classification
    whereas clause (d) covers goods by their description viz, F
    components, spares and accessories of the said capital
    goods. It may be noted that there is a separate entry for
    components, spares and accessories and no reference
    has been made about their classification. As such, scope
    of this entry is not restricted only to the components, G
    spares and accessories falling under Chapters 82, 84,
    85 or 90 but covers all components, spares and
    accessories of the specified goods irrespective of their
    classification. The same was the position prior to
    amendment in Rule 57Q (i.e. prior to 23-7-1996) when H
   604     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A fabricating supporting structures for installation of equipments
  such as vacuum pan, crystallizers, sugar grader, elevator, etc.,
  HR plates (black steel) are used in boiler of sugar plant to keep
  temperature high, MS bars, shapes and sections are used for
  erection of new cooling tower, chequred plates and ITR plates
B are used to construct the platforms, the cane carrier chain and
  spares are used to transfer the raw material/semi processed
  material from stage to other, as the capital goods in the terms
  of Rule 57Q, treating these items as the parts and components
   of the plant. The question which arose before the Tribunal was
C that whether these items used for fabricating structures to
   support and install various machineries of the sugar plant are
   capital goods in terms of the Rule 57Q. The Tribunal while
   allowing the MODVAT credit found that these items, except MS
   sections and shapes, used for raising structure to support the
   various machines, parts of machineries of the plant would be
0
   covered by the explanation to Rule 570 as a capital goods. The
   Tribunal referred to its own decision in Malavika Steel Limited's
   case and without semblance of any discussion, has partly
   allowed the assessee's appeal. In view of our findings and the
   conclusion in the earlier part of the judgment, we cannot agree
E with the reasoning of the Tribunal.

        25. In the result, this appeal fails and, accordingly,
    dismissed. Costs are made easy.

F B.B.B.                                        Appeal dismissed.
 SARASWATI SUGAR MILLS v. COMMISSIONER OF                     603
   CENTRAL EXCISE, DELHI-Ill [H.L. DATTU, J.]
  respondent-assessee availed MODVAT credit on steel plates          A
  and M.S. channels, as capital goods in terms of Serial No.5 of
 the Table given below Rule 570, used for erection of the
 chimney for the diesel generating set. The parties were ad idem
 that diesel generating set falls under chapter heading 85 which
 is mentioned at Serial No.3 of the Table and also the chimney       B
 is an accessory in terms of Serial No.5 of the Table given below
 570. The issue which was agitated before the Court was
 whether the Steel plates and MS Channels used in the
 fabrication of chimney are capital goods in terms of Serial No.5
 of the Table below Rule 570. This Court, whilst applying the user   c
 test, had held that the steel plates and MS Channels used in
the fabrication of chimney are capital goods as contemplated
 by Rule 570 as the chimney is not only an accessory but also
an integral part of the diesel generating set in the light of the
 Pollution Control laws mandating that all plants emitting           D
effluents should be equipped with apparatus to reduce or get
 rid of effluent gases. We are afraid that this decision would
assist the appellants in support of the contention canvassed.
In this instant case, the Court was considering whether steel
plates and M.S. Channels used in fabrication of chimney for
diesel generating sets are entitled to avail of MODVAT credit        E
by treating them as capital goods in terms of Rule 570 of the
Central Excise Rules. This Court, applying 'user test', has
arrived at a conclusion that Steel Plates and MS Channels are
used in the fabrication of chimney which is an integral part of
the diesel generating set. Therefore, the test applied by this       F
Court is whether the items that were at issue were integral part
of a machinery. If that test is satisfied, there will not be any
difficulty to hold a particular item of the machinery is a
component part and therefore, will fall within the ambit of the
expression 'capital goods'.                                          G

    24. In Simbhaoli Sugar Mills Ltd. v. Commissioner of
Central Excise, Meerut, 2001 (135) ELT 1239 (Tri-Del), the
appellant is a manufacturer of sugar and availed a MODVAT
credit on the joints, channels, angles and MS Beams used in          H