2004 (9) TMI 491 - AT - Central Excise

Summary

Issues: Modvat credit eligibility on Air-conditioner falling under Heading 8415.00.

Analysis:
1. The case involved a dispute regarding the eligibility of Modvat credit on an Air-conditioner falling under Heading 8415.00. The Revenue contended that the Air-conditioners were used to maintain the appropriate standard temperature for the galvanizing line electrical control room for electronics of the plant.

2. The Commissioner (Appeals) allowed the credit on the Air-conditioner and set aside the penalty imposed on the respondents by the original authority. The Revenue argued that at the relevant time, Air-conditioners were excluded from the definition of capital goods under Rule 57Q(1), making the credit not allowable. They relied on previous tribunal decisions to support their stance.

3. On the other hand, the respondents, represented by an advocate, produced photographs of the control room and other areas of the factory where the Air-conditioners were being used. They referred to tribunal decisions that supported the eligibility of parts of Air-conditioning plants for Modvat credit if essential for the completion of the manufacturing process and integrally connected with final production.

4. The advocate for the respondents also highlighted Rule 57Q(1), which specifies the description of capital goods eligible for credit when used in the factory for the manufacture of final products. The Tribunal carefully considered the submissions from both sides and found that only parts of Air-conditioning appliances and machinery were mentioned in the rule, not the Air-conditioner itself, leading to the conclusion that credit cannot be allowed on the Air-conditioner as such.

5. Consequently, the Tribunal set aside the order of the Commissioner (Appeals) that allowed the credit on the Air-conditioner. Additionally, the Tribunal agreed with the advocate for the respondents that since it was a matter of interpretation without any intention to evade duty, the penalty imposed on the respondents was not sustainable. Therefore, the penalty was also set aside in this case.