2011 (10) TMI 587 - HC - Central Excise

Summary

Issues:
Appeal by Revenue under Section 35-G of the Central Excise Act, 1954 against the order of the Customs, Excise & Service Tax Appellate Tribunal South Zonal Bench, Bangalore regarding the disallowance of modvat credit on certain items declared as 'capital goods' by the assessee.

Analysis:
The case involved an appeal by the Revenue against the order of the Tribunal dismissing their appeal regarding the disallowance of modvat credit by the assessee. The respondent company, a manufacturer of Sea Water Magnesia, had taken modvat credit on certain items during the establishment of the factory and declared them as 'capital goods' as per Rule 57 Q of the Central Excise Rules, 1944. The dispute arose when the Revenue alleged irregular availing of modvat credit by the assessee in contravention of the Rules, leading to a show cause notice and subsequent disallowance of credit and imposition of penalty by the adjudicating authority.

The key contention revolved around the interpretation of the term 'capital goods' as per Explanation-I to Rule 57 Q of the Central Excise Rules, 1944. Initially, the definition included machines, machinery, plant, equipment, components, spare parts, accessories, moulds, dies, generating sets, and weigh bridges. Subsequently, through an amendment in 1996, refectories, refractory material, steel tubes, and pipes were added to the definition of 'capital goods'. The Commissioner of Appeals and the Tribunal concurred that the goods in question fell within the ambit of the original clauses a, b, and c of Explanation-I, even before the 1996 amendment, thereby entitling the assessee to modvat credit on steel tubes and refractories received before the said amendment date.

After carefully considering the orders of the Commissioner of Appeals and the Tribunal, the High Court found no error or perversity in the impugned order. The Court upheld the concurrent finding that steel pipes and tubes qualify as 'capital goods' under the relevant rules, allowing the modvat credit availed by the assessee. Consequently, the appeal by the Revenue was dismissed at the admission stage, emphasizing the lack of merits in the appeal and ruling out any costs to be imposed in the matter.