2010 (7) TMI 962 - AT - Central Excise

Summary

Issues:
1. Denial of credit on certain capital goods.
2. Stay petition and payment made under protest.
3. Eligibility of Modvat credit on pressure gage and FBC boiler fans.
4. Admissibility of Modvat credit on other items listed in the stay petition.

Analysis:

Issue 1: Denial of credit on certain capital goods
The appellant, engaged in paper manufacturing, faced a proposal to deny credit of &8377; 1,36,975 on the grounds that certain capital goods were not used for production or processing. The Commissioner granted relief on some items but disallowed credit on pressure gage and FBC boiler fans, totaling &8377; 10,470. However, in a stay petition filed earlier, the total disallowed amount was shown as &8377; 55,452. The petition became infructuous as the appellant paid the disputed amount under protest, leading to the appeal being taken up for decision.

Issue 2: Stay petition and payment made under protest
The stay petition filed by the appellant in 1999, seeking relief on the disallowed credit, became infructuous as the appellant paid the full disputed amount of &8377; 55,452 under protest. This payment, confirmed by the Deputy Commissioner, led to the appeal being considered for decision, as the appellant was entitled to be heard despite the payment.

Issue 3: Eligibility of Modvat credit on pressure gage and FBC boiler fans
The appellant argued that pressure gage and FBC boiler fans were essential accessories of the pulp mill and boiler, respectively, making them eligible for Modvat credit. The advocate contended that these items directly contributed to the manufacturing process of paper, enhancing efficiency. The Tribunal agreed, stating that since the main machinery was eligible for credit, accessories like pressure gage and boiler fans should also be allowed credit, as they fulfilled the criteria of being accessories.

Issue 4: Admissibility of Modvat credit on other items listed in the stay petition
The Tribunal found that the remaining items listed in the stay petition were also components or accessories of the machines used in paper manufacturing. Despite the lack of discussion by the Commissioner on these items, the Tribunal concluded that they were eligible for Modvat credit. It was determined that all the items listed were integral to the manufacturing process, and thus, the appellant was granted credit on all the items, allowing the appeal.

This judgment highlights the importance of considering accessories as eligible for credit when the main machinery qualifies, emphasizing the direct contribution of components to the manufacturing process.