1997 (4) TMI 275 - AT - Central Excise

Summary

Issues:
Denial of capital goods Modvat credit under Rule 57Q of the Central Excise Rules amounting to Rs. 26,99,123.80 demanded from the appellants.

Analysis:
The issue in this case revolves around the denial of capital goods Modvat credit under Rule 57Q of the Central Excise Rules. The appellants were denied the credit amounting to Rs. 26,99,123.80, which was demanded under the provisions of Rule 57U of the Central Excise Rules. The materials for which the credit was denied include tubes & pipes, E.O.T. crane, material handling system, electrical actuator, current transformer, E.W. & fibre cables, Emrom cards/driver cards, and control panels. The Commissioner of Central Excise, Pune interpreted the definition of capital goods under Rule 57Q, emphasizing that the definition is more restricted compared to the definition of inputs for Modvat purpose under Rule 57A. The Commissioner held that the materials in question do not directly bring about any change in the material or are not used for producing or processing goods directly.

The appellants argued, through their Chartered Accountant, that Tribunal decisions exist supporting the eligibility of most of the materials for capital goods Modvat credit under Rule 57Q. On the other hand, the Department's representative contended that the definition of capital goods under Rule 57Q is restrictive and does not align with the broader definition of inputs under Rule 57A. However, the Tribunal considered previous decisions favoring the appellants. In the case of Commissioner of Central Excise v. Uttam Engg., the Tribunal held that E.O.T. cranes used for bringing together various parts of assembly are eligible for capital goods Modvat credit. The Tribunal also cited the case of Collector of Central Excise v. Nova Udyog Ltd., where it was established that electric wires and cables fall within the broader definition of capital goods under Rule 57Q.

Moreover, in the case of Collector v. Nav Bharat Paper Mills, the Tribunal ruled that electrical transformers and electric control panels are essential for the proper functioning of machinery and production of goods, thus falling under the definition of capital goods. Similarly, in the case of Jeep Industry v. Commissioner, it was held that machines, measuring, and testing equipment are eligible for capital goods credit. Based on the precedents and the interpretation of the definition of capital goods in the cited decisions, the Tribunal set aside the impugned order and allowed the appeal, concluding that all the materials in question are covered by the definition of capital goods under Rule 57Q as per the Tribunal's interpretation in the referenced cases.