2006 (1) TMI 500 - AT - Central Excise

Summary

Issues:
1. Entitlement to avail Modvat credit for solar cells and button cells used in the manufacture of calculators.

Analysis:
The sole issue in the present appeal before the Appellate Tribunal CESTAT, MUMBAI was whether the manufacturer of calculators, falling under heading 8470.00, is entitled to avail Modvat credit for solar cells and button cells, falling under heading 8506, used in the manufacturing process. The Commissioner (Appeals) had allowed Modvat credit on the grounds that button cells and solar cells are integral parts of the calculators, as they are sold along with the calculators and their value is included in the assessable value of the calculators. The Commissioner held that button cells are not mere accessories but essential for the functioning of calculators, and solar cells are integrated parts of the calculators. The revenue contended that these cells are not inputs for calculators since customers can purchase them separately from outside sources.

After considering the arguments from both sides, the Appellate Tribunal found that the appellate authority had established that the value of these cells is included in the assessable value of the calculators. The revenue did not object to this inclusion of value, indicating that the cells should be treated as inputs for the calculators, making them eligible for credit under Rule 57A. The Tribunal referenced a previous case where Modvat credit was allowed for duty paid on dry battery cells fitted to clocks and timepieces. Based on this precedent and the findings of the appellate authority, the Tribunal concluded that there was no reason to interfere with the Commissioner (Appeals) order. Consequently, the appeal filed by the revenue was rejected.

This judgment clarifies the eligibility of manufacturers to claim Modvat credit for components like solar cells and button cells used in the production of goods, emphasizing the importance of considering the inclusion of component value in the assessable value when determining credit entitlement. The decision also underscores the significance of established precedents in similar cases to guide rulings on Modvat credit eligibility for specific components integrated into manufactured goods.