2003 (2) TMI 260 - AT - Central Excise

Summary

Issues: Modvat credit on capital goods (radiant coil) under Rule 57Q.

In this judgment by the Appellate Tribunal CEGAT, Bangalore, the issue at hand pertains to the Modvat credit on capital goods, specifically the radiant coil, as per Rule 57Q. The party contended that the radiant coil is an integral part of the Thermal Fluid System, and therefore, Modvat credit should not be denied. The Department, on the other hand, denied the credit citing that the heat generated by the Thermal Fluid System extended to a neighboring factory.

The Revenue, represented by Shri Munir Ahmed, justified the Department's action by referring to a previous Tribunal decision in the case of Sree S.G.K. Industries. The Tribunal's decision highlighted Rule 57R(2) and emphasized that the credit of specified duty for capital goods used for electricity generation should be allowed only within the factory premises for manufacturing final products or any other purpose. The Tribunal concluded that if power generated is transferred outside the factory, proportionate Modvat credit should be disallowed. The Tribunal stressed that Modvat credit is permissible only for capital goods used within the factory for specific purposes.

Upon careful consideration of the arguments and records, the Tribunal found that in the present case, the radiant coil, being an essential component of the Thermal Fluid System installed in the appellant's factory, should not be denied Modvat credit based on the heat extending to a neighboring factory. The Tribunal distinguished this case from the precedent cited by the Department, where credit was denied for using capital goods to distribute power outside the factory. Given that the radiant coil was utilized within the appellant's factory, the Tribunal ruled in favor of the appellant, allowing the appeal and granting the Modvat credit on the capital goods.

In conclusion, the judgment clarifies the application of Modvat credit on capital goods under Rule 57Q, emphasizing the importance of utilizing such goods within the factory premises for specific purposes to be eligible for the credit. The decision underscores the need for a direct connection between the use of capital goods and the manufacturing process within the factory to qualify for Modvat credit, ensuring that the credit is granted proportionately based on the goods' utilization within the factory premises.