2003 (1) TMI 634 - AT - Central Excise

Summary

Issues Involved:
1. Denial of Modvat credit on capital goods used in the thermal power plant.
2. Definition and eligibility of capital goods for Modvat credit.
3. Non-filing and delay in filing declarations under Rule 57T.
4. Invocation of the longer period of limitation.
5. Specific items eligible for Modvat credit.
6. Non-eligibility of certain items for Modvat credit.
7. Re-determination of credit eligibility and limitation issues.

Detailed Analysis:

1. Denial of Modvat Credit on Capital Goods Used in the Thermal Power Plant:
The Tribunal found that the decision in Ferro Alloys Corporation Ltd. was no longer valid due to subsequent rulings by the Larger Bench and the Supreme Court, which rejected the theory of 'direct participation' for goods eligible for Modvat credit. The Tribunal concluded that items like Turbo Generator Sets and associated items, material handling equipment, and bearings used in different units of the plant are eligible for Modvat credit under Rule 57Q.

2. Definition and Eligibility of Capital Goods for Modvat Credit:
The Tribunal referenced several cases (e.g., CCE v. M.M. Forgings Ltd., Nova Iron & Steel Ltd. v. CCE) that supported the eligibility of material handling equipment and other items as capital goods. The Tribunal emphasized that items ensuring economical and safe processes in various plant units are eligible for Modvat credit.

3. Non-Filing and Delay in Filing Declarations Under Rule 57T:
The Tribunal noted that the Commissioner's reliance on certain case laws for denying credit based on non-filing or delayed filing of declarations was overruled. The Tribunal directed that the matter be re-determined in light of the amendment to Rule 57T(13) and relevant Tribunal decisions, such as JBM Tools v. CCE.

4. Invocation of the Longer Period of Limitation:
The appellants argued that the eligibility of items for Modvat credit is a matter of legal interpretation, not mis-declaration or suppression of facts. The Tribunal agreed that if the issues were already covered by earlier show cause notices, the plea of limitation should be upheld. The Tribunal directed the re-determination of whether the longer period of limitation was applicable, considering the facts and previous notices.

5. Specific Items Eligible for Modvat Credit:
The Tribunal identified several items eligible for Modvat credit, including Turbo Generator Sets, material handling equipment, bearings, and certain insulation items. The Tribunal also highlighted that electrodes used for fabrication (not maintenance) are eligible for credit.

6. Non-Eligibility of Certain Items for Modvat Credit:
The Tribunal upheld the Commissioner's findings that items like computers used for CAD (not CAM), water treatment chemicals, and certain resins are not eligible for Modvat credit under Rule 57Q. The eligibility of these items needs to be re-determined based on their actual use.

7. Re-Determination of Credit Eligibility and Limitation Issues:
The Tribunal directed the re-determination of credit eligibility for various items under Rule 57A or Rule 57Q, considering the applicability of Rule 57T(13) and the plea of limitation. The appellants were instructed to present necessary show cause notices to substantiate their claims.

Conclusion:
The appeal was disposed of with directions for re-determination of credit eligibility and limitation issues based on the Tribunal's findings. The Tribunal emphasized the need for factual analysis and adherence to legal precedents in determining the eligibility of Modvat credit for the disputed items.