2004 (4) TMI 494 - AT - Central Excise

Issues Involved:

1. Eligibility of Modvat credit for various items under Rule 57Q.
2. Interpretation of the definition of "capital goods" under Rule 57Q.
3. Specific eligibility of items such as fasteners, earthing equipment, molecular sieves, transformers, weigh-bridge structures, gas turbine parts, lighting fittings, and more.

Detailed Analysis:

I. Nuts, Bolts, Studs, Screw, Washer, Fasteners:

*Findings:* The Commissioner (Appeals) denied Modvat credit, stating these items play no part in the manufacture of final goods. However, the Tribunal found that since these fasteners are part of the plant used for producing and processing goods, they are covered by Explanation 1(a) and 1(b) to Rule 57Q. References: CCE v. Bihar Caustic & Chemicals Ltd., Vindhya Telelinks Ltd. v. CCE.

II. Neutral Grounding Resistor, Earthing Wire, Earthing Cable, Strip for Earthing, Earthing Trolley, Earthing Equipment:

*Findings:* The Commissioner (Appeals) denied credit, stating these items protect devices. The Tribunal referenced the Larger Bench decision in Jawahar Mills, upheld by the Supreme Court, which covers electrical items under capital goods.

III. Molecular Sieves:

*Findings:* The Commissioner (Appeals) agreed these are inputs but denied credit under Rule 57Q. The Tribunal held that credit should be granted under Rule 57A, supported by decisions in CCE v. Modi Rubber and CCE v. Flex Chemicals.

IV. ICTS for Transformer, Electrical Transformer, Accessories for Transformers, Distribution Transformer:

*Findings:* The Commissioner (Appeals) denied credit, interpreting that only specific transformers are eligible. The Tribunal disagreed, stating items covered by clauses (a), (b), or (c) of Explanation to Rule 57Q are eligible, supported by Jawahar Mills and Surya Roshini decisions.

V. Weigh-bridge, Weigh-bridge Structure, Platform Monitor:

*Findings:* The Commissioner (Appeals) denied credit on weigh-bridge structures. The Tribunal allowed credit, referencing the Madras High Court decision in Trichy Distilleries & Chemicals Ltd. and other Tribunal decisions.

VI. Gas Turbine Parts:

*Findings:* The Commissioner (Appeals) denied credit, stating these are maintenance equipment. The Tribunal allowed credit, applying the same reasoning as for weigh-bridge structures.

VII. Lighting Fittings and Parts, MV/SV Chokes, Bulbs T.H.:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not covered by the definition of capital goods. The Tribunal allowed credit, referencing the Jawahar Mills decision.

VIII. Switch Socket & Spares, Front Socket, ELP/WPS:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not eligible. The Tribunal allowed credit, referencing Jawahar Mills.

IX. Boiler Component, Board Wall, Box Column, Plate, etc.:

*Findings:* The Commissioner (Appeals) denied credit, stating these are structural parts. The Tribunal allowed credit, as these are parts of the boiler essential for the production process.

X. Disturbance Recorder:

*Findings:* The Commissioner (Appeals) denied credit, stating this item is specifically excluded. The Tribunal allowed credit, stating it is part of the captive power plant.

XI. Flame Proof Equipment:

*Findings:* The Commissioner (Appeals) denied credit, stating these are safety equipment. The Tribunal allowed credit, as these are parts of the plant.

XII. S.S. Powder:

*Findings:* The Commissioner (Appeals) denied credit, stating this is an input. The Tribunal allowed credit, stating it is part of the spin pack assembly.

XIII. Hydraulic Pallet Truck/Spring Hangers & Supports:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not used in production. The Tribunal allowed credit, as these are material handling equipment.

XIV. Catalyst Support Spring:

*Findings:* The Commissioner (Appeals) denied credit, stating this is a support item. The Tribunal allowed credit, as it is part of the MEG plant.

XV. Track Ball Assembly:

*Findings:* The Commissioner (Appeals) denied credit, stating these goods are excluded. The Tribunal allowed credit, referencing the reasoning for transformers.

XVI. Connectors AEC-02R-20-455QC:

*Findings:* The Commissioner (Appeals) denied credit, stating these are for conveying. The Tribunal allowed credit, as these are part of the POY plant.

XVII. Industrial Air Screw Fan Type AS:

*Findings:* The Commissioner (Appeals) denied credit, stating these are for ventilation. The Tribunal allowed credit, as these are part of the captive power plant.

XVIII. Spares for Heater Plant, Studs with Nuts:

*Findings:* The Commissioner (Appeals) denied credit, stating these are for assembling. The Tribunal allowed credit, applying the same reasoning as for fasteners.

XIX. Pneumatic Impact Wrench:

*Findings:* The Commissioner (Appeals) denied credit, stating these are for maintenance. The Tribunal allowed credit, as these are essential for production.

XX. Switch Board, Switch Bracket:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not used in production. The Tribunal allowed credit, referencing the Jawahar Mills decision.

XXI. Intrinsic Safety Barrier:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not essential. The Tribunal allowed credit, as these are part of the digital control system.

XXII. Tube Closure Assemblies & Enclosures:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not used in production. The Tribunal allowed credit, as these are essential components of the spinning machine.

XXIII. Spares for Microjet Printer:

*Findings:* The Commissioner (Appeals) denied credit, stating these are excluded. The Tribunal allowed credit, referencing the reasoning for transformers.

XXIV. Spare Parts for Industrial Sewing Machine:

*Findings:* The Commissioner (Appeals) denied credit, stating these are used post-production. The Tribunal allowed credit, as bagging is part of the manufacturing process.

XXV. Gas Leak Detector, Chlorate Sensor:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not pollution control equipment. The Tribunal allowed credit, as these are essential parts of gas detectors.

XXVI. Glass Cloth Electrical Insulators:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not used in production. The Tribunal allowed credit, as these are parts of the cracker plant.

XXVII. Element with Fibre Glass, Sleeve in G.I. Flux Conduit:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not used in production. The Tribunal allowed credit, as these are essential parts of the bagging machine.

XXVIII. Spare Parts for Combustible Gas Indicator:

*Findings:* The Commissioner (Appeals) denied credit, stating these are not pollution control equipment. The Tribunal allowed credit, as these are essential parts of gas detectors.

XXIX. FLP Plug:

*Findings:* The Commissioner (Appeals) denied credit, stating these are electrical components. The Tribunal allowed credit, referencing the Jawahar Mills decision.

XXX. Bus Ducts & Accessories (Raw & Fire Water):

*Findings:* The Commissioner (Appeals) denied credit, stating these are for electrical connections. The Tribunal allowed credit, referencing the Jawahar Mills decision.

XXXI. Braided Gland Packing:

*Findings:* The Commissioner (Appeals) denied credit, stating these are for electrical connections. The Tribunal allowed credit, referencing the Jawahar Mills decision.

Conclusion:

The Tribunal concluded that all disputed items are capital goods under Rule 57Q and entitled to Modvat credit, setting aside the impugned orders and allowing the appeals.

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