2006 (6) TMI 328 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on capital goods - Classification of tanks under Heading 7309.00.
2. Claiming benefit of credit based on classification under Heading 8421.10.
3. Dispute over whether tanks are storage tanks or part of sugar clarification system.
4. Interpretation of Chapter 73 and its coverage under the definition of capital goods.
5. Applicability of previous Tribunal decision on changing classification at recipient's hands.

Issue 1: Denial of Modvat credit on capital goods - Classification of tanks under Heading 7309.00
The appellants appealed against the Order-in-Appeal by the Commissioner (Appeals) denying Modvat credit on capital goods, specifically M.S. Fabricated Syrup Tanks classified under Heading 7309.00. The Revenue contended that as storage tanks fall under Chapter 73, they are not covered by the definition of capital goods, hence the denial of credit.

Issue 2: Claiming benefit of credit based on classification under Heading 8421.10
The appellants argued that the tanks were classified under Heading 8421.10 by the manufacturer and were part of the sugar clarification system, not storage tanks. They claimed the benefit of credit based on this classification, supported by the Tribunal's decision in a previous case. The Revenue did not dispute the manufacturer's classification but objected to the credit claim.

Issue 3: Dispute over whether tanks are storage tanks or part of sugar clarification system
The appellants contended that the tanks were not storage tanks but syrup tanks integral to the sugar clarification system for chemical mixing and transferring treated syrup. They argued that as part of specific machinery, the credit should not be denied, especially since the Revenue did not object to taking credit on the entire system.

Issue 4: Interpretation of Chapter 73 and its coverage under the definition of capital goods
The Revenue's argument was based on the classification of storage tanks under Chapter 73, which they claimed is not covered by the definition of capital goods. This interpretation formed the basis of their denial of Modvat credit to the appellants.

Issue 5: Applicability of previous Tribunal decision on changing classification at recipient's hands
The Tribunal, in aligning with a previous decision, held that classifications of capital goods should not be changed at the recipient's hands. They emphasized that the tanks in question, used for chemical mixing and syrup treatment as part of a specified system, should entitle the appellants to credit regardless of the classification under different headings. Consequently, the impugned order was set aside, and the appeal was allowed.

This judgment from the Appellate Tribunal CESTAT, New Delhi, highlights a dispute over Modvat credit on capital goods, specifically M.S. Fabricated Syrup Tanks, classified under different headings. The case involved arguments regarding the classification of the tanks, whether they were storage tanks or part of a sugar clarification system, and the interpretation of Chapter 73 in relation to the definition of capital goods. The Tribunal's decision emphasized the importance of maintaining the original classification of capital goods and recognized the specific use of the tanks in the sugar clarification system as grounds for allowing the credit claim.