2002 (3) TMI 789 - AT - Central Excise

Summary

Issues:
Whether measuring instruments are capital goods for the purpose of Rule 57Q of the Central Excise Act, 1944, as it existed prior to 16-3-1995.

Analysis:
The case involves the assessee, a manufacturing unit, availing Modvat credit under Rule 57Q of the Central Excise Rules for a Dimensional Universal Machine and Digital Height Gauge. The Department issued show cause notices alleging that these items do not qualify as capital goods. The first notice dated 23-6-1995 highlighted the Modvat credit taken and directed the assessee to show cause as to why the credit should not be disallowed. Similarly, the second notice dated 24-7-1995 raised the issue of penalty under Rule 173Q for availing Modvat credit on these items. The Assistant Commissioner held that the assessee was not entitled to Modvat credit under Rule 57Q, leading to an appeal by the assessee.

The Commissioner (Appeals) overturned the Assistant Commissioner's decision, emphasizing that the items in question were essential for the manufacturing process and fell within the ambit of Rule 57Q. The Commissioner cited the decision of CEGAT in the case of MM Forgings and the ruling of the Supreme Court in the case of Rajasthan Chemicals to support the allowance of Modvat credit for such essential instruments. Subsequently, the Department filed appeals against the Commissioner's orders, which were dismissed by the Single Member of the Tribunal based on precedents like CCE v. Shanthi Synthetics.

In response to the High Court's directive, the Tribunal prepared a statement of the case for the High Court's opinion. The case revolves around the interpretation of Rule 57Q and the classification of measuring instruments as capital goods. The Commissioner's decision to allow Modvat credit for the instruments was supported by legal precedents and the essential role of the items in the manufacturing process. The Tribunal's actions were in compliance with the High Court's order, reflecting the complexity of determining the eligibility of items for Modvat credit under the Central Excise Act.