2007 (7) TMI 633 - HC - Central Excise

Whether an assessee can avail Modvat credit on capital goods namely M.S. Angles, M.S. Sheets, Plates, Channels, Pipes and Tubes under Rule 57Q of the Central Excise Rule, 1944 although these goods are not used in relation to the manufacture of the final products?

Summary

Issues:
1. Whether an assessee can avail Modvat credit on certain capital goods not directly used in the manufacture of final products.

Analysis:

Issue 1: Modvat credit on capital goods

The appeal before the High Court of Bombay involved a dispute regarding the availment of Modvat credit on specific capital goods under Rule 57Q of the Central Excise Rule, 1944, even if these goods were not directly used in the manufacturing process of the final products. The Commissioner of Central Excise challenged the Tribunal's order dated 21/9/2005, raising the question of law on the eligibility of the assessee to claim credit on items like M.S. Angles, Sheets, Plates, Channels, Pipes, and Tubes. The Court noted that the Tribunal had found these structural items to be essential for the machinery's proper functioning, ensuring no vibration or movement during the manufacturing process. The Tribunal concluded that these items were intricately linked to the machinery used in the production of the final product. Referring to precedents, the Court cited a case involving pipes and tubes used for cooling inert spheres in an assessee's plant, where the Court had allowed Modvat credit as these items were integral to the manufacturing process. Additionally, the Court referenced a Supreme Court case establishing that inputs used within a factory would be eligible for Modvat credit. Based on these legal principles and the factual findings of the Tribunal, the High Court upheld the Tribunal's decision, stating that no substantial question of law arose from the CESTAT's order.

In conclusion, the High Court of Bombay dismissed the appeal, affirming the Tribunal's decision that the assessee was entitled to avail Modvat credit on the capital goods in question, despite their indirect use in the manufacturing process. The Court's analysis emphasized the importance of the items in question for the machinery's functionality and their integral connection to the production of the final product, aligning with established legal precedents supporting the eligibility of such items for Modvat credit.