2006 (11) TMI 522 - AT - Central Excise

Summary

Issues: Admissibility of credit for evaporation boats as capital goods under Rule 57Q.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the question of whether evaporation boats used with an evaporation machine are eligible for credit as capital goods. The appellant, engaged in manufacturing metallised BOPP film, argued that the evaporation boats are essential components of the machine necessary for the metallising process. The revenue, however, relied on previous decisions to deny the credit, stating that evaporation boats do not qualify as inputs under Rule 57A. The Tribunal considered Rule 57Q, which allows specified goods used in the manufacturing process to be eligible for credit as capital goods, including components, spares, and accessories. The revenue did not contest the manufacturing process described by the appellant. The Tribunal noted that the evaporation boats are integral to the metallising machine and without them, the metallising process would not be possible.

In the decisions referenced by the revenue, the Tribunal had previously held that evaporation boats cannot be considered inputs. For instance, in the case of Madhya Pradesh Polypropylene Ltd., the Tribunal classified evaporation boats as tools and equipment rather than inputs. However, the Tribunal in the present case found that the evaporation boats, being part of the vacuum chamber of the evaporation machine and essential for the metallising process, qualify as capital goods. The evaporation boats were deemed necessary for the metallising of film, as they possess the property of withstanding high temperatures under vacuum conditions. The Tribunal concluded that since the evaporation boats are indispensable for the metallising process, they are entitled to credit as capital goods.

Therefore, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant. The judgment highlights the importance of considering the specific role and necessity of components within a manufacturing process when determining their eligibility for credit as capital goods under relevant provisions.