2005 (7) TMI 470 - AT - Central Excise

Summary

Issues:
1. Eligibility of imported spare parts for capital goods credit under Rule 57Q of the C.E. Rules, 1944.
2. Interpretation of tariff classification for Modvat credit eligibility.
3. Applicability of Rule 57Q to imported spare parts of compressors used in a Smelter Plant.

Analysis:

The judgment by the Appellate Tribunal CESTAT, CHENNAI dealt with the issue of whether imported spare parts for a compressor used in a Smelter Plant were eligible for capital goods credit under Rule 57Q of the C.E. Rules, 1944. The appellants, manufacturers of copper anode, imported spare parts for a compressor used in their Smelter Plant where gases were converted to sulphuric acid. The department initially rejected the declaration for capital goods credit, leading to a show cause notice and subsequent appeals up to the Commissioner (Appeals), all of which upheld the department's view.

The learned Counsel for the appellants argued that the spare parts were essential for the blower in the Smelter Plant, crucial for converting gases to sulphuric acid as required by environmental norms. The department contended that the grounds raised were irrelevant as eligibility for capital goods credit depended on the tariff classification of the goods rather than their specific use. The judgment clarified that during the disputed period, eligibility for capital goods credit was based on the tariff headings specified for Modvat credit under Rule 57Q.

It was established that compressors falling under heading 84.14 and used in refrigerating or air-conditioning appliances were excluded from being considered as 'modvatable' goods under Rule 57Q. However, compressors falling under the same heading but used in other appliances were eligible for capital goods credit. Therefore, it was concluded that the imported spare parts of the compressor used in the Smelter Plant were indeed eligible for capital goods credit under Rule 57Q for the period in question. The impugned order was set aside, and the appeal was allowed by the Tribunal.