2004 (2) TMI 577 - AT - Central Excise

Summary

Issues:
Appeal against Order-in-Appeal allowing Modvat credit on computers as capital goods under Rule 57Q of Central Excise Rules.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the eligibility of computers as capital goods for availing Modvat credit under Rule 57Q of the Central Excise Rules. The Revenue contested the Order-in-Appeal that allowed Modvat credit on computers used by the respondents in the manufacture of computer parts and accessories. The Revenue argued that computers did not qualify as capital goods used in or in relation to the manufacturing process of computer parts.

During the period in question, which was prior to 31-5-1995, the definition of capital goods included various items like machines, machinery, plant, equipment, etc., used for production or processing of goods. The respondents, engaged in manufacturing computer parts and accessories, claimed Modvat credit on a personal computer as a capital good. However, the Revenue contended that there was no evidence to demonstrate that the personal computer was utilized in the manufacturing process of the final product.

The Tribunal noted that the only argument presented was that the computer was used as testing equipment. It was highlighted that testing equipment became eligible for Modvat credit only from 16-5-95 as per Notification No. 11/95-C.E. The Tribunal referred to the decision in the case of Surya Roshni Ltd., which established that Notification Nos. 11/95 and 14/96-C.E. had prospective application. Consequently, the Tribunal allowed the appeal filed by the Revenue, emphasizing the lack of evidence showing the personal computer's use in the manufacturing process of the final product.

In conclusion, the judgment by the Appellate Tribunal CESTAT, New Delhi resolved the issue by disallowing the Modvat credit on computers claimed by the respondents, as the personal computer in question was not proven to be used in or in relation to the manufacturing process of computer parts and accessories during the relevant period before the specified date for testing equipment to qualify for such credit.