2006 (5) TMI 365 - AT - Central Excise

Summary

Issues:
- Availment of credit on polyester resins under Rule 57AA of the Central Excise Rules, 1944.

Analysis:
The issue in this case pertains to the availment of credit on polyester resins under Rule 57AA of the Central Excise Rules, 1944. The Appellant argued that the item in question should not be considered as capital goods as it does not fall under the definition provided in Rule 57AA. The Revenue contended that the item does not qualify as capital goods under the specified categories. The Revenue also highlighted the insertion of "Explanation 2" through Notification No. 6/2001, clarifying that inputs used in the manufacture of capital goods are eligible for credit. The Revenue argued that this notification should be applied retroactively from 1st March, 2001. However, the Respondent maintained that regardless of the notification and the added explanation, the Appellant should be entitled to Modvat credit as the item was essential for the fabrication of tubes, pipes, and tanks crucial for manufacturing final products like Chlorinated Parafin & Hydrochloric acid.

Upon reviewing the arguments, the Tribunal found that the item in question was indeed necessary for the fabrication of tubes, pipes, and tanks, which are integral parts of the manufacturing process for the final products. The Tribunal noted that the addition of "Explanation 2" through the notification aimed to permit credit on items used in the manufacture of capital goods. Considering the essential role of the item in the manufacturing process and the legislative intent behind the notification, the Tribunal concluded that the Appellant was eligible for the credit. Consequently, the Tribunal dismissed the appeal filed by the Revenue, upholding the order of the Commissioner (Appeal) and affirming the eligibility of the Appellant for the Modvat credit on the item in question.

In conclusion, the judgment clarified the eligibility of the Appellant for credit on polyester resins under Rule 57AA of the Central Excise Rules, 1944, emphasizing the importance of the item in the manufacturing process and the legislative intent behind the relevant notification and explanation.