2009 (7) TMI 727 - HC - Central Excise

Cenvat inputs - Whether the Hon ble Tribunal is correct in holding that Grinding Wheels i.e. the parts of grinding machines/machinery are eligible for availing modvat credit under Rule 57-A of the C. Ex. Rules 1944 when such machines machinery plant equipment apparatus tools of appliances etc. have been specifically excluded from such eligibility in terms of the Explanation under the same very Rule. ? Held that similar issue decided by Tribunal in Collector of Central Excise Bolpur Vs. Durgapur Cement Works 2008 -TMI - 48740 - CEGAT NORTHERN BENCH NEW DELHI holding steel balls used for grinding entitled to credit. Grinding wheels to be considered as parts of grinding machine used by respondent and as inputs entitled to credit. Question answer in favour of respondent assessee.

Summary

Issues:
1. Interpretation of Rule 57-A of the Central Excise Rules, 1944 regarding eligibility for availing modvat credit on Grinding Wheels.
2. Determining whether Grinding Wheels are considered as inputs under Rule 57-A.
3. Disallowance and recovery of modvat credit by the Central Excise Department.
4. Adjudication of the show cause notice by the Assistant Collector and subsequent appeals by the respondent assessee.
5. Decision of the Customs, Excise and Gold (Control) Appellate Tribunal on the eligibility of Grinding Wheels for modvat credit.
6. Reference application filed by the Central Excise Department under Section 35G of the Central Excise Act.
7. Legal arguments presented regarding the eligibility of Grinding Wheels as inputs under Rule 57-A.
8. Application of legal precedents to determine the eligibility of Grinding Wheels for modvat credit.
9. Final decision by the High Court on the interpretation of Rule 57-A and eligibility of Grinding Wheels as inputs.

Analysis:

The case involves a dispute over the eligibility of Grinding Wheels for availing modvat credit under Rule 57-A of the Central Excise Rules, 1944. The respondent assessee had taken modvat credit on Grinding Wheels during a specific period, which was challenged by the Central Excise Department. The department argued that Grinding Wheels, being parts of machinery, were not eligible for credit as they were not directly used in the manufacturing process of final products. The Assistant Collector disallowed the credit, leading to appeals by the respondent assessee.

The Collector of Central Excise (Appeals) upheld the disallowance, citing the Explanation clause under Rule 57-A. However, the Customs, Excise and Gold (Control) Appellate Tribunal overturned this decision, considering Grinding Wheels as parts of the grinding machines and thus eligible for modvat credit. The Tribunal relied on previous decisions to support its stance.

The Central Excise Department then filed a reference application before the High Court, arguing that Grinding Wheels should not be considered inputs under Rule 57-A due to their nature as accessories added to machinery. The Court analyzed relevant legal provisions and precedents, including decisions from other Tribunals and the Supreme Court, to determine the eligibility of Grinding Wheels. It was concluded that Grinding Wheels are indeed parts of the grinding machine and should be considered as inputs under Rule 57-A, thus ruling in favor of the respondent assessee.

The High Court's decision was based on the principle that items eligible for modvat credit must participate in the manufacturing process without which the final product cannot be produced. Applying this principle to the case at hand, the Court affirmed the Tribunal's decision and disposed of the reference without costs.

Overall, the judgment clarifies the interpretation of Rule 57-A and establishes the eligibility of Grinding Wheels as inputs for availing modvat credit, emphasizing the integral role of such components in the manufacturing process.