1998 (4) TMI 242 - AT - Central Excise

Summary

Issues: Contesting denial of Modvat credit of Rs. 1,66,998/- including items not considered capital goods and disallowed credit based on original invoices.

In this case, the main issue revolves around the denial of Modvat credit totaling Rs. 1,66,998/-, with Rs. 1,27,775/- being denied due to the items not meeting the definition of capital goods under Rule 57Q. Additionally, an amount of Rs. 39,223/- was disallowed as it was claimed based on original invoices. The appellant, represented by Shri M.P. Devnath, argued that the items in question, such as SE Copper Wire, Transformer, Static Converter, and others, are essential for the manufacturing process and should be considered as capital goods. The counsel highlighted that previous Tribunal decisions supported the eligibility of certain items like Transformers and Static Converters for credit. Moreover, the appellant contended that even items like Bakelite Sheet and M. Seal should qualify as capital goods due to their usage in repairing pipelines and machinery. The appellant also cited precedents to support the claim that credit can be claimed based on original invoices, contrary to the Commissioner's decision.

Upon review, the Tribunal acknowledged the merit in considering Transformers, Static Converters, Conduit PVC Arm Cable, and Final Washing Assembly eligible for credit. However, the eligibility of resins, Bakelite sheets, and M. Seal as capital goods was deemed debatable and required further detailed examination during the appeal hearing. Consequently, the Tribunal directed the appellants to deposit Rs. 27,017/-, representing the credit amount related to the debated items, within four weeks. Upon this deposit, the pre-deposit requirement for the remaining duty and penalty was waived, and their recovery stayed pending the appeal. Failure to comply with this directive would lead to the automatic dismissal of the appeal without prior notice.

The Tribunal's decision highlighted the importance of differentiating between items eligible for Modvat credit as capital goods and those not meeting the criteria. The judgment emphasized the need for a detailed assessment of each item's role in the manufacturing process to determine its eligibility for credit. Additionally, the ruling clarified the procedural aspect of depositing a specific amount related to disputed items to proceed with the appeal process, ensuring compliance with the pre-deposit requirements to avoid dismissal.