2002 (1) TMI 984 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of various items for capital goods MODVAT credit under Rule 57Q of the Central Excise Rules, 1944.
2. Interpretation of the term "capital goods" as defined in Rule 57Q.
3. Application of the Supreme Court's ruling on similar items in the context of MODVAT credit.

Issue-wise Detailed Analysis:

1. Eligibility of Various Items for Capital Goods MODVAT Credit:

The primary issue in these appeals was whether the items listed by the assessee qualify for capital goods MODVAT credit under Rule 57Q. The items in question included Diapharm Viton Base, Seamless Steel Tubes, VT Fuse Link, Rupturing Sample Assembly, M.S. ERW Steel Tube, Units for ICAM System, Junction Box, Filter Bag Non Oven Fabric, Siemens Power Contactor, and SS Corrugated Metallic Hose.

The Commissioner (Appeals) had previously granted MODVAT credit for these items, considering them essential for the manufacture of final products. The Revenue challenged this decision, arguing that these items do not qualify as capital goods under Rule 57Q and are used only for conveying, connecting, or disconnecting electricity, which is not a production activity.

2. Interpretation of the Term "Capital Goods":

The Tribunal reviewed the definition of "capital goods" under Rule 57Q, which includes machines, machinery, plant, equipment, apparatus, tools, or appliances used for producing or processing any goods or for bringing about any change in any substance for the manufacture of final products. The Tribunal also considered the components, spare parts, and accessories of the aforementioned items used for the same purpose.

The Tribunal noted that the Supreme Court, in a batch of appeals, had held that the definition of capital goods is very liberal, encompassing a wide range of items used in the manufacturing process. The Supreme Court had affirmed that items such as wires and cables, which perform similar functions to the items in question, qualify as capital goods.

3. Application of the Supreme Court's Ruling:

The Tribunal referred to the Supreme Court's ruling in the case of Jawahar Mills, which confirmed that items like cables and wires used for conducting electricity in the manufacturing process qualify as capital goods. The Tribunal found that the items listed by the assessee perform similar functions and are used either in the preparation of raw material, at an intermediate stage, or for pollution control, all of which are integral to the manufacturing process.

The Tribunal also considered the case laws cited by the assessee, including Century Cements Ltd., Grasim Cements, and Modi Alkalies & Chemicals, which supported the eligibility of the items for MODVAT credit.

Conclusion:

The Tribunal concluded that the items in question are essential for the manufacturing process and qualify as capital goods under Rule 57Q. The Revenue's argument that these items are not used in the manufacturing activity was rejected, as the Supreme Court had already established a liberal interpretation of the term "capital goods." Consequently, the Tribunal upheld the Commissioner (Appeals)'s decision to grant MODVAT credit for these items and dismissed the Revenue's appeals.