2004 (12) TMI 442 - AT - Central Excise

Summary

Issues:
Eligibility for Modvat credit under Rule 57Q of the Central Excise Rules on goods falling under chapter sub-heading 84.24 in the year 1998.

Analysis:
The judgment dealt with the eligibility of Modvat credit under Rule 57Q of the Central Excise Rules concerning goods under chapter sub-heading 84.24 in the year 1998. The dispute arose when the appellant's claim for capital goods credit on a sound blast machine was denied due to its classification under heading 84.24, which excluded it from the definition of capital goods under Rule 57Q. Additionally, a penalty was imposed on the appellant under Rule 173Q for availing inadmissible credit, leading to the appeal.

During the proceedings, it was argued that the sound blast machine formed a part of an annealing line, which included various equipment. The appellant received parts of the sound blasting machine under different invoices, acknowledging that the machine fell under chapter heading 84.24. However, the appellant contended that the sound blasting machine was a component part of an annealing machine falling under heading 84.79, making its parts eligible for credit under the relevant rule and Board's clarification in Circular No. 276/1/10/96-TRU, dated 2-12-1996.

The circular highlighted that credit on component parts should not be denied based on classification discrepancies compared to the machines mentioned in the explanation annexed to Rule 57Q. However, the judgment emphasized that while component parts of certain machines were eligible for Modvat credit, parts of excluded machines like those under chapter heading 84.24 could not be considered eligible for capital goods credit. Therefore, the denial of credit was deemed appropriate, although the penalty imposed by the Commissioner was set aside due to the lack of evidence of deliberate contravention of rules to evade duty.

In conclusion, the appeal was partly allowed, with the judgment clarifying the distinction between eligible and excluded component parts for Modvat credit under Rule 57Q of the Central Excise Rules in the context of goods classified under chapter sub-heading 84.24 in 1998.