2006 (3) TMI 625 - AT - Central Excise

Summary

Issues: Application of Rule 16 of the Cenvat Credit Rules, 2002 for claiming Modvat credit on goods dismantled and used as components for manufacturing other goods.

Analysis:
1. The case involved the manufacture of machines cleared on a rental basis, dismantled upon return, and their components used for manufacturing other machines. The lower authority denied Modvat credit under Rule 16, stating that the goods were not brought back for being remade, refined, or reconditioned. However, the Commissioner (Appeals) overturned this decision, citing a Tribunal ruling in a similar case.

2. The Tribunal considered the case where the goods were dismantled and used as components for manufacturing other goods, similar to the precedent cited. The learned S.D.R. argued that the phrase "for any other reason" in Rule 16 should be interpreted in line with the preceding terms, invoking the principle of ejusdem generis to restrict the scope of the rule. The S.D.R. distinguished the present case from the precedent by highlighting differences in the nature and usage of the goods.

3. With no representation from the respondents, the Tribunal examined the records and found that the facts aligned with the cited precedent, where goods were not remade or refined but used as components for producing different goods. Consequently, the Tribunal upheld the allowance of Modvat credit in the present case, emphasizing that the credit cannot be denied when components are used for manufacturing other quality goods.

4. The Tribunal, based on the above analysis, dismissed the appeal, concluding that since the components were utilized for manufacturing a different quality of goods, the denial of credit was unwarranted. The judgment was pronounced in court, affirming the decision to uphold the Modvat credit claim in accordance with Rule 16 of the Cenvat Credit Rules, 2002.