2005 (5) TMI 445 - AT - Central Excise

Summary

Issues:
1. Eligibility of capital goods credit under Rule 57Q of the Central Excise Rules, 1944 for Air Conditioning machinery.

Analysis:

1. The appeal concerns the eligibility of capital goods credit under Rule 57Q of the Central Excise Rules, 1944 for Air Conditioning machinery granted by the Commissioner (Appeals) to the Respondents for the month of March 1999. The Appellant argues that Air Conditioning machinery was not specified for capital goods credit under the Rule as it stood in March 1999. The Respondents contend that as the machinery was directly linked to production activity, capital goods credit was rightfully granted by the lower appellate authority. The learned Counsel for the Respondents relies on relevant circulars and previous tribunal decisions to support their position.

2. The Tribunal scrutinizes the submissions and finds that the lower appellate authority did not reference Rule 57Q when allowing the capital goods credit for Air Conditioning machinery. The Commissioner (Appeals) had based the decision on the machinery's direct link to production activity, which was deemed correct for the period before March 1, 1997, but not applicable for March 1999. The Rule had been completely revised from March 1, 1997, making all goods falling under Chapter 84, except specified exclusions, eligible for capital goods credit. Air Conditioning appliances under Heading 84.15 were among the excluded goods. The nature of the machinery's use in the factory, as argued by the Respondents, was not a relevant consideration post the rule revision. Previous tribunal decisions cited by the Respondents were deemed inapplicable as the machinery fell under the exclusionary clause, making the Respondents ineligible for the Modvat credit.

3. The Tribunal reviews the Board's Circular relied upon in previous tribunal cases and notes that it clarified the provisions of Rule 57Q before and after July 23, 1996. However, the rule underwent a comprehensive revision from March 1, 1997, where only tariff classification determined eligibility for Modvat credit. Therefore, the Board's clarification and previous tribunal decisions were deemed inapplicable post-March 1, 1997. As the Respondents' machinery fell under the exclusionary clause, the Tribunal concludes that they were not eligible for the Modvat credit. Consequently, the Revenue's appeal is allowed, overturning the decision to grant capital goods credit for Air Conditioning machinery for March 1999.