2001 (9) TMI 1061 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Modvat credit on capital goods under Rule 57Q.
2. Interpretation of the term "capital goods" as per Rule 57Q.
3. Applicability of judicial precedents and Larger Bench decisions to the present case.
4. Specific items in dispute for Modvat credit eligibility.

Detailed Analysis:

1. Eligibility of Modvat Credit on Capital Goods under Rule 57Q:
The core issue revolves around whether the items in question qualify for Modvat credit as capital goods under Rule 57Q. The appellants, M/s. Aarti Steel Ltd., argued that the items including Thyrotron-FX2524, Tropothene-XXPLE, Cable Aluminium Conductor, Ventura Make Spare Impeller for 48" Tube Axial Flow Fan, Insulated Copper Strip, PVC Cables, and Welding Machine should be eligible for Modvat credit. The authorities below had disallowed the credit, interpreting Rule 57Q restrictively, stating that these items did not have a direct role in the production process.

2. Interpretation of the Term "Capital Goods" as per Rule 57Q:
The authorities below interpreted the term "capital goods" under Rule 57Q narrowly, stating that the items must have a direct role in the production process. They emphasized that the goods must be used in the manufacture of final products, not merely in relation to their manufacture. The Tribunal, however, referred to the broader interpretation provided in the case of Jawahar Mills Ltd., where it was held that the term "plant" includes any apparatus used by a businessman for carrying on his business, not limited to machinery but also including tools, appliances, etc.

3. Applicability of Judicial Precedents and Larger Bench Decisions:
The appellants relied on the decisions of the Larger Bench in Jawahar Mills Ltd. and Surya Roshini Ltd., where it was established that items such as control panels, cables, and welding electrodes qualify as capital goods under Rule 57Q. The Tribunal noted that the Supreme Court had affirmed the views of the Larger Bench in Jawahar Mills Ltd., thereby reinforcing the broader interpretation of capital goods. The Tribunal also cited the Supreme Court's decision, which emphasized that the user of the item determines its qualification as capital goods, and the mere fact that an item is not directly involved in the production process does not disqualify it.

4. Specific Items in Dispute for Modvat Credit Eligibility:
The Tribunal examined the specific items for which Modvat credit was denied:
- Thyrotron-FX2524: The Tribunal found that this item, used in the manufacturing process, qualifies as capital goods.
- Tropothene-XXPLE, Cable Aluminium Conductor: These items were considered essential for the manufacturing process and thus qualify as capital goods.
- Ventura Make Spare Impeller for 48" Tube Axial Flow Fan, Insulated Copper Strip: The Tribunal held that these items, being parts of machinery used in the manufacturing process, qualify as capital goods.
- PVC Cables and Welding Machine: Following the precedent set in Jawahar Mills Ltd., the Tribunal concluded that these items also qualify as capital goods.

Conclusion:
The Tribunal allowed the appeals, holding that the items in question qualify for Modvat credit as capital goods under Rule 57Q. The Tribunal emphasized the broader interpretation of the term "capital goods" as established in previous judicial decisions, particularly the Larger Bench decisions and the Supreme Court's affirmation in Jawahar Mills Ltd. The Tribunal directed that consequential relief be granted to the appellants in accordance with the law.