2003 (12) TMI 362 - AT - Central Excise

Summary

Issues: Denial of capital goods eligibility under Rule 57Q of the Central Excise Rules, 1944 for a rewinding machine combined with an inkjet printing machine.

Analysis:
The Appellate Tribunal CESTAT, Mumbai addressed the denial of capital goods eligibility under Rule 57Q of the Central Excise Rules, 1944 for a rewinding machine combined with an inkjet printing machine. The Additional Commissioner had denied eligibility, stating that the manufacturer of soap, the final product, was complete without printing as printing was deemed unnecessary for marketability. The Commissioner (Appeals) upheld this decision, emphasizing that the printing done on wrappers before the manufacturing process was not connected to the production of goods. However, upon review, the Tribunal found that the inkjet printing machine was crucial for printing specific details required by the Standards of Weights and Measures Act, 1976 and Packaged Commodity Rules, 1977 on soap wrappers. These details, such as date of packing and price, were mandatory for soap marketability, as per legal requirements.

The Tribunal referred to a judgment by the Delhi High Court in the case of Delhi Cloth and General Mills Co. Ltd., highlighting that compliance with relevant rules is essential for goods to be useful and exchangeable. In this context, the soap being marketable only when complying with labeling regulations was emphasized. The Tribunal also considered the definition of 'manufacture' under the Central Excise Act, 1944, stating that any operation incidental and ancillary to the manufacturing process would be considered part of the overall manufacture. It was clarified that the timing of the use of the machines, whether before or after the soap manufacturing process, was not a relevant factor in determining eligibility for capital goods credit. Citing the precedent set by the Tide Water Oil Co. case, the Tribunal concluded that the appeal must be allowed, as the impugned items were integral to the manufacture of the goods, making them eligible for capital goods credit.

In light of the above analysis, the Appellate Tribunal CESTAT, Mumbai allowed the appeal, overturning the denial of capital goods eligibility for the rewinding machine combined with the inkjet printing machine.