2010 (3) TMI 151 - HC - Central Excise

Cenvat / Modvat Credit - Whether credit can be availed under Rule 57A of the Central Excise Rules 1944 on glass coated cloth which does not form part of the final product and could not have been used for the manufacture of the final product? Held that By virtue of rule 57A and 57B the assessee is entitled to avail the modvat credit on the inputs/material used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not. - In this case the material being used for manufacture of clay graphite stopper which by stretch of imagination termed as machinery. In fact in Escorts Mahle Ltd. s case (supra) even parts of machinery would be eligible for modvat credit

Summary

Issues:
1. Interpretation of Rule 57A of the Central Excise Rules, 1944 regarding availing credit on specific goods.
2. Eligibility of modvat credit on inputs used in or in relation to the manufacture of final products.

Analysis:
The case involves the interpretation of Rule 57A of the Central Excise Rules, 1944, specifically addressing the question of whether credit can be availed on glass coated cloth that does not form part of the final product and could not have been used for the manufacture of the final product. The Court examined the provisions of Rule 57-A, emphasizing that the manufacturer is entitled to claim modvat credit on finished excisable goods as notified by the Central Government. The credit of specified duty is allowed on inputs used in the manufacture of final products, whether directly or indirectly, and whether contained in the final product or not.

Furthermore, the Court referred to Section 57B, which permits the manufacturer of final products to take credit of the specified duty paid on inputs used in or in relation to the manufacture of final products, including those not contained in the final products. However, it was noted that credit cannot be claimed on machines, machinery, equipment, apparatus, tools, appliances, or capital goods as per Section 57B(2).

Citing the precedent set by the Supreme Court in Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd., the Court established that materials used in the manufacture of final products are eligible for modvat credit as inputs. The judgment highlighted that even parts of machinery, like the material used for manufacturing clay graphite stopper, can be considered eligible for modvat credit, as seen in previous cases such as Collector of C.Ex. v. Ballarpur Industries Ltd.

Ultimately, the Court concluded that the manufacturer is entitled to claim modvat credit on inputs/material used in or in relation to the manufacture of final products, regardless of whether they are directly or indirectly part of the final product. Consequently, the question posed was answered in favor of the assessee and against the revenue.

This judgment provides clarity on the eligibility of modvat credit on inputs used in the manufacturing process and emphasizes the broad scope of credit availability under the relevant provisions of the Central Excise Rules, 1944.