2004 (3) TMI 540 - AT - Central Excise

Summary

Issues:
- Appeal filed by Revenue against Order-in-Appeal disallowing Modvat credit on design and development charges.
- Eligibility of design and development charges as Modvat credit.
- Interpretation of Rule 57A of Central Excise Rules.
- Comparison with a previous case regarding design and development charges.
- Decision on allowing Modvat credit on duty paid on design and development charges.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal disallowing Modvat credit on design and development charges availed by the Respondents, who are manufacturers of excisable goods. The Assistant Commissioner disallowed the credit as the charges were not considered eligible inputs under Rule 57A and relevant notification. The case was remanded to consider the inclusion of design charges in the assessable value of the final product for extending Modvat credit.

2. The Respondents had sub-contracted design and moulds to another unit, which incorrectly classified the charges as excisable goods and paid duty. The Commissioner (Appeals) was urged to consider the charges as part of the cost of manufacturing moulds. However, the Tribunal noted that the charges were not excisable goods and were wrongly classified for duty payment, making them ineligible for Modvat credit under the prescribed scheme.

3. The Respondents argued that the duty paid on design and development could be considered for Modvat credit as the designs were intended for manufacturing moulds. Citing a previous case, they contended that the duty on such charges should be allowed as credit. Nevertheless, the Tribunal found that the charges were paid by a unit not engaged in manufacturing excisable goods, making them ineligible for Modvat credit.

4. In comparing the present case with the precedent, the Tribunal highlighted that the circumstances were different. Unlike the previous case where components for IC engines were developed and supplied along with duty payment, the charges in the current scenario were paid by a non-manufacturing unit, rendering them unsuitable for Modvat credit.

5. Ultimately, the Tribunal set aside the decision of the Commissioner (Appeals) and allowed the appeal of the Revenue, emphasizing that the design and development charges were not excisable goods and did not qualify for Modvat credit. The judgment clarified the ineligibility of such charges for duty credit under the Modvat scheme, based on the specific circumstances and legal provisions governing excisable goods and input eligibility.