2006 (4) TMI 403 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat Credit on Ion Exchangers and Point Attack Pits under Rule 57Q of the Central Excise Rules, 1944.

Analysis:
1. The appeal was filed against the denial of Modvat Credit on Ion Exchangers and Point Attack Pits by the Commissioner of Central Excise (Appeals). The Commissioner found that Ion Exchangers fell under CSH 39.14 and were not eligible for credit under Rule 57Q. Similarly, Point Attack Pits were considered spares for surface miners under sub-heading 8430, which was excluded from capital goods under Rule 57Q. The denial of credit was upheld, and a penalty was imposed under Rule 173Q(bb) of the Central Excise Rules, 1944.

2. The appellant argued that Ion Exchangers were essential for softening water used in critical equipment to prevent efficiency-damaging deposits. Citing precedents, the appellant contended that Ion Exchangers should be eligible for Modvat credit as capital goods. Similarly, regarding Point Attack Pits, it was argued that they were machinery tools falling under eligible headings for capital goods credit under Rule 57Q. The appellant referenced a Supreme Court judgment supporting their claim that machinery used in captive mines was eligible for credit under Rule 57Q.

3. The respondent contended that Ion Exchangers were not considered capital goods under Rule 57Q and, therefore, the denial of credit was justified. Regarding Point Attack Pits, it was argued that they were not used within the factory premises, but the respondent did not oppose the submission that they were used in mines shown in the factory's ground plan.

4. After considering the arguments, the Tribunal found that Ion Exchangers played a crucial role in water purification for various factory equipment, making them eligible for capital goods credit. Citing precedents, the Tribunal established that items facilitating the production process, like Ion Exchangers, were eligible for credit. Similarly, Point Attack Pits, being tools for surface miners used in captive mines within the factory's ground plan, were deemed eligible for credit under Rule 57Q, as supported by a Supreme Court ruling.

5. In conclusion, the Tribunal set aside the denial of credit on both Ion Exchangers and Point Attack Pits, allowing the appeal based on the eligibility of these items for Modvat credit under Rule 57Q.