2003 (11) TMI 508 - AT - Central Excise

Summary

Issues:
1. Admissibility of Modvat credit on full width grinding roller, carding accessories stand, and rectifying bed as accessories for the carding machine.
2. Classification of full width grinding roller, carding accessories stand, and rectifying bed as parts or accessories of the carding machine.
3. Interpretation of Rule 57R(2) regarding the admissibility of Modvat credit on capital goods used for the manufacture of intermediate products.

Analysis:
1. The appeal by Revenue challenged the allowance of Modvat credit on full width grinding roller, carding accessories stand, and rectifying bed by the ld. Commissioner (Appeals), arguing that these items were not used for producing or processing goods. The Revenue contended that these items did not qualify as capital goods under Rule 57Q. However, the Commissioner (Appeals) held that these items were used in or in relation to the manufacture of the final product.

2. During the hearing, the Revenue argued that accessories are not parts of the carding machine and, therefore, should not be eligible for Modvat credit. The Consultant for the Respondent submitted that the items in question were parts of the carding machine, crucial for the manufacture of sliver used in producing cotton yarn, the final product. The Consultant provided evidence to support this claim, and the department confirmed that certain components were indeed parts of the carding machinery. The Commissioner (Appeals) justified the admissibility of Modvat credit on these capital goods, even though termed as accessories.

3. The Judge referred to a previous case, CCE v. Sudarshanam Spinning Mills Ltd. & Ors., where it was established that Modvat credit is available on capital goods used in manufacturing intermediate products like combed/cotton yarn (sliver), which are further used in producing the final product, cotton yarn. The Judge cited Rule 57R(2) to emphasize that the credit on capital goods should not be denied based on the emergence of intermediate products during manufacturing, as long as the final product is dutiable. The Judge also referenced a CBEC circular supporting the allowance of Modvat credit on capital goods used in manufacturing intermediate products exempt from duty, reiterated in the present case.

In conclusion, the Judge allowed the Modvat credit on parts of the carding machine, considering their role in the production process leading to the final product, cotton yarn. The appeal by the Revenue was dismissed, upholding the order of the Commissioner (Appeals) based on established legal principles and precedents.