2004 (10) TMI 434 - AT - Central Excise

Summary

Issues: Denial of capital goods credit under Rule 57Q for a "Speed Frame" used in the preparation of Cotton Yarn prior to 21-10-1994.

Analysis:
1. The appellant contested the denial of capital goods credit under Rule 57Q for a "Speed Frame" used in the preparation of Cotton Yarn before 21-10-1994. The appellant argued that capital goods used for processes preparatory to the manufacture of Cotton Yarn were eligible for Modvat credit during the relevant period. The appellant relied on a previous decision by the Division Bench in Appeal Nos. E/792 & 793/1999, where capital goods credit was allowed for a similar item, the "Draw Frame," used in a Spinning Mill before 21-10-1994.

2. In the referenced case of Sudarshanam Spinning Mills, the "Draw Frames" were used for the preparation of an intermediate product, Carded/Combed Cotton, during the manufacture of Cotton Yarn. The Revenue argued that since the intermediate product was not specified as a final product under Rule 57Q before 21-10-1994, capital goods used for its preparation were not eligible for Modvat credit. However, the Tribunal rejected this argument, stating that the capital goods used in the process should be considered as used for the manufacture of the excisable final product, Cotton Yarn. The Tribunal held that the "Draw Frame" was eligible for capital goods credit even before being specified under Rule 57Q.

3. Similarly, in the present case, the "Speed Frame" was used in a preparatory stage of manufacturing Cotton Yarn, just like the "Draw Frame" in the Sudarshanam Spinning Mills case. As the capital goods in question were used for a process leading to the manufacture of an excisable final product and the period of dispute was before 21-10-1994, the Tribunal found the issue in favor of the appellant. Consequently, the impugned order was set aside, and the appeal was allowed.