2005 (3) TMI 538 - AT - Central Excise

Summary

Issues:
1. Eligibility of telephone cable for Modvat credit under Rule 57Q.
2. Interpretation of Rule 57Q regarding the use of capital goods for the manufacture of final products.

Issue 1:
The appeal involved a question of whether telephone cable used by the respondents in their factory during a specific period was eligible for Modvat credit under Rule 57Q. The original authority disallowed the credit, but the first appellate authority allowed it. The appellant relied on a stay order by the Bench in a related matter. The dispute centered around the interpretation of Rule 57Q and the eligibility criteria for Modvat credit on telephone cables. The appellant argued that the telephone cables were not used for manufacturing final products, thus not qualifying for capital goods credit.

Issue 2:
The crux of the second issue was the interpretation of Rule 57Q concerning the use of capital goods in the factory for the manufacture of final products. The appellant contended that the telephone cables should have been used directly in the manufacturing process to qualify for credit. However, the respondent argued that during the relevant period, Rule 57Q did not mandate the direct use of capital goods for the manufacturing process. The only requirement was that the capital goods specified under Rule 57Q must be used within the factory of the manufacturer of final products.

Analysis:
The appellate tribunal analyzed the provisions of Rule 57Q, which required that the capital goods specified in the rule and used in the factory of the manufacturer of final products were eligible for Modvat credit. The tribunal noted that the rule did not specify any requirement for the direct use of capital goods in the manufacturing process. Therefore, the contention that the telephone cable should have been directly used in manufacturing final products was not accepted. The tribunal emphasized that the key criterion was the specified capital goods being used within the factory premises. As per the tribunal's interpretation, the lower appellate authority correctly decided on the issue, upholding the allowance of Modvat credit on the telephone cable. Consequently, the tribunal rejected the appeal by the revenue, affirming the decision of the lower appellate authority.