2002 (6) TMI 459 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit on Packing Machine.
2. Interpretation of the term "factory" under Central Excise Act.
3. Eligibility of Modvat credit on Rotary Air Valve.

Issue 1: Disallowance of Modvat credit on Packing Machine:
The appellants manufactured cement clinker and availed Modvat credit on a Packing Machine under Rule 57Q of Central Excise Rules, 1944. However, a show cause notice alleged that they did not conform to the definition of capital goods under Rule 57Q as they were using the machine outside the factory. The Assistant Commissioner disallowed the Modvat credit after considering the party's reply. The Commissioner (Appeals) rejected the appeal against this decision. The appellant argued that their clinker and cement units, despite having separate registrations, should be considered as one "factory" under the Central Excise Act. They relied on a Tribunal decision and the definition of "capital goods" under Rule 57Q. However, the judgment emphasized that only machinery used for producing final products is eligible for Modvat credit, which was not the case with the Packing Machine used for cement packing. Therefore, the appeal was dismissed.

Issue 2: Interpretation of the term "factory" under Central Excise Act:
The appellant contended that their two units, manufacturing clinker and cement, should be treated as one "factory" due to their proximity, even though they had separate registrations. They argued that the Packing Machine used for cement packing in the clinker unit should be eligible for Modvat credit. However, the judgment clarified that the Modvat credit is only applicable to machinery used for producing final products, which was not the case with the Packing Machine in question. The definition of "factory" under the Central Excise Act and the Tribunal decision were considered, leading to the dismissal of the appeal.

Issue 3: Eligibility of Modvat credit on Rotary Air Valve:
The appellants also availed Modvat credit on a Rotary Air Valve used in their clinker unit. Similar to the Packing Machine issue, it was found that this machine was exclusively used for the cement unit, not the clinker unit. The judgment reiterated that Modvat credit is only admissible for machinery used in the production of final products. Consequently, the appeal regarding the Rotary Air Valve was also dismissed, upholding the decisions of the lower authorities.

In conclusion, both appeals were dismissed, affirming the disallowance of Modvat credit on the Packing Machine and Rotary Air Valve due to their usage not aligning with the criteria for capital goods under Rule 57Q of the Central Excise Rules, 1944.