2015 (8) TMI 1336 - HC - Central Excise

Denial of CENVAT credit - Notification No.67/95 CE dated 16.3.1995 - Rule 57A & 57Q of the Central Excise Rules, 1944 - Held that - The benefit of Rule 57Q is available, on the duty paid on the capital goods used by the manufacturer in his factory and for utilising the credit so allowed towards payment of duty of excise leviable on the final products. On the basis of clause (1) of Explanation to sub-rule (1) of Rule 57Q. Sub-rule (1) of Rule 57A excludes capital goods as defined in rule 57Q, if they are used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products or used for any purpose for manufacture in the factory - Decided in favour of the assessee.

Issues Involved:
1. Admissibility of Modvat credit on cement and steel used in laying the foundation for machinery.
2. Admissibility of Modvat credit on cement and steel angles used in the construction of support structures for machinery.

Issue-wise Detailed Analysis:

1. Admissibility of Modvat Credit on Cement and Steel Used in Laying the Foundation for Machinery:

The appellant, a manufacturer of cement, claimed Modvat credit under Rule 57A of the Central Excise Rules, 1944, for capital goods declared as inputs used in the manufacture of intermediary machinery parts. The Revenue issued show cause notices alleging that the appellant failed to furnish necessary particulars and wrongly availed Modvat credit. The Assistant Commissioner expunged the Modvat credit availed by the appellant through three orders. On appeal, the Commissioner of Central Excise (Appeals) allowed Modvat credit on several items but denied it for cement and steel angles. The Tribunal upheld this denial, leading to the appellant's appeal to the High Court.

The High Court examined Rule 57A, which allows credit for duty paid on goods used in or in relation to the manufacture of final products, whether directly or indirectly, and whether contained in the final product or not. The explanation under Rule 57A includes inputs used within the factory for manufacturing final products. The court noted that the credit is allowable even if the goods are not found in the final product but are used in relation to its manufacture. The court referenced previous decisions (Commissioner of Central Excise v. India Cements Ltd.) that supported the appellant's case, stating that structural steel items used for construction are eligible for credit under Rule 57Q.

2. Admissibility of Modvat Credit on Cement and Steel Angles Used in the Construction of Support Structures for Machinery:

The appellant also claimed Modvat credit for cement and steel angles used in constructing support structures for machinery. The Tribunal had partially allowed this claim, stating that credit was admissible for steel angles used in fabricating conveyors before 23.7.1996. The High Court referred to Rule 57Q, which applies to finished excisable goods and allows credit for duty paid on capital goods used in the factory. The definition of "capital goods" under Rule 57Q includes various machinery and equipment used in the manufacturing process.

The High Court emphasized that Rule 57Q is subject to Rule 57A, which excludes capital goods if they are used for producing or processing goods or for any purpose in the factory. The court concluded that the denial of credit by the Revenue under both Rule 57A and Rule 57Q was impermissible. The court held that the appellant was entitled to Modvat credit for cement and steel angles used in the construction of support structures for machinery.

Conclusion:

The High Court allowed the appeals, answering the questions of law in favor of the assessee. The court held that Modvat credit is admissible for cement and steel used in laying the foundation for machinery and for cement and steel angles used in constructing support structures for machinery. The civil miscellaneous appeals were allowed with no costs.

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