2005 (1) TMI 527 - AT - Central Excise

Disallowance of Cenvat/Modvat - Capital goods - Appeal to Commissioner (Appeals) - Conditional order - HELD THAT - In the case of JBM Tools Ltd. v. CCE 2001 (8) TMI 910 - CEGAT, MUMBAI , it has been held that the Modvat credit cannot be denied merely for non-filing of declaration where there is no dispute on the receipt of duty paid inputs/capital goods. There are other decisions also to support of the appellants. Hence we allow Modvat credit for these items. As regards item at Sl. No. 10, HR Steels Cut Coils, it is seen that the same is used in water circulation system which is an accessory of the plant. Hence we have no hesitation in extending the Modvat credit to the same. When certain items are not considered as capital goods, but only as input and if these items are used to manufacture of goods then credit can be extended to them irrespective of the fact that the resulting goods are excisable or not in view of Rule 57D(2). We make this observation only to indicate how liberal the rules are. In view of the above observations we extend the Modvat credit to all the goods in Serial Nos. 1 to 10. The learned SDR observed that certain items are used in sheds and roofing, etc. We want to make it clear that any item used in civil structure shall not be entitled for capital goods. While extending the benefit of Modvat credit, the authorities have to keep this in mind. With regard to Modvat credit on tanks, the Commissioner (Appeals) has held that wherever the impugned goods have been used for fabrication of eligible capital goods, particularly tanks, credit should not be denied. The Respondents have pointed out that the Commissioner (Appeals) has powers to remand the matter to the lower authority u/s 35A(3) even after its amendment from 11-5-2001 as held by the Hon ble High Court of Gujarat in the case of CCE v. Medico Labs. 2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD . There is nothing in Central Excise Act indicating that the Commissioner (Appeals) cannot pass orders with certain conditions. Passing a conditional order in a way amounts to passing a remand order. It has been clearly held that even if, the amendment of Section 35A(3), the Commissioner (Appeals) has powers to remand. Under these circumstances, we do not find any substance in the Revenue s appeals. Therefore, we reject the same. In fine, the appeals of M/s. JVSL are allowed and those of Revenue are dismissed.

Summary

Issues Involved:
1. Disallowance of Modvat credit on certain items as capital goods.
2. Conditional orders by the Commissioner (Appeals) and the scope of appellate orders u/s 35A of the Central Excise Act.

Summary of Judgment:

Issue 1: Disallowance of Modvat Credit on Certain Items as Capital Goods

Details: The appeals by M/s. JVSL concern the disallowance of Modvat credit on items such as HR plates, angles, channels, joists, etc., used for manufacturing overhead cranes, storage tanks, and other technical structures. The Revenue argued that these items, falling under Chapter 73, are not specified as capital goods u/s 57Q of Modvat Rules and are not parts, components, or accessories of any specified machine. The learned SDR cited several case laws to support the disallowance.

Judgment: The Tribunal, referencing the Apex Court's liberal interpretation in Commissioner of Central Excise, Coimbatore v. Jawahar Mills Ltd. - 2001 (132) E.L.T. 3 (S.C.), extended Modvat credit to the disputed items. It was held that the support structures are integral to the functioning of capital goods and thus qualify as capital goods. The Tribunal allowed Modvat credit for all items listed in Serial Nos. 1 to 10, except those used in civil structures.

Issue 2: Conditional Orders by the Commissioner (Appeals)

Details: The Revenue's appeals contested the conditional orders issued by the Commissioner (Appeals), arguing that such orders exceed the scope of appellate orders u/s 35A of the Central Excise Act. The Commissioner (Appeals) had directed verification of certain conditions before allowing Modvat credit.

Judgment: The Tribunal found that the Commissioner (Appeals) has the authority to pass conditional orders, which effectively amount to remand orders. The Tribunal referenced the Gujarat High Court's decision in CCE v. Medico Labs. - 2004 (173) E.L.T. 117 (Guj.), affirming that the Commissioner (Appeals) retains the power to remand even after the amendment of Section 35A(3). Consequently, the Tribunal dismissed the Revenue's appeals.

Conclusion:

The appeals by M/s. JVSL are allowed, granting Modvat credit for the disputed items. The appeals by the Revenue are dismissed, upholding the conditional orders issued by the Commissioner (Appeals).

(Pronounced in the Court on 11-1-2005).