2013 (12) TMI 1608 - HC - Central Excise

CENVAT credit - capital goods - Sliver/combed/carded cotton falling under Ch. 5202 - whether credit would be available when this heading remained specifically excluded from the purview of capital goods under erstwhile Rule 57Q as it stood during the material time?

Summary

Issues:
Whether CESTAT was correct in allowing modvat credit for duty paid on capital goods excluded under Rule 57Q for the manufacture of certain products?

Analysis:
The appeal raised the question of whether the CESTAT was justified in permitting modvat credit for duty paid on capital goods excluded under Rule 57Q for the production of specific products. The assessee, a textile mill, availed modvat credit for duty paid on a draw frame used in manufacturing intermediate products like sliver between Carding and simplex machines to cotton yarn under Chapter Heading 5202. The Revenue argued that during the relevant period, capital goods used for manufacturing sliver under Chapter 5202 were not eligible for credit as per Rule 57Q, which excluded certain goods like cotton carded/combed from the list of eligible products. The Commissioner upheld the Revenue's stance, emphasizing the exclusion of certain goods and denying relief to the assessee. However, the Tribunal, considering similar claims by other assessees, referred to a circular by the Central Board of Excise & Customs stating that modvat credit could not be denied on capital goods used in intermediate products exempt from duty under new rules. The Tribunal's decision was influenced by a previous order in a similar case and the circular, prompting the Revenue to file the present appeal.

The High Court noted that despite notice, the respondent did not provide representation. The learned Standing Counsel for the appellant highlighted a previous order of the Court in Commissioner of Central Excise v. Singaravelar Spinning Mills, where it was held that the assessee was entitled to modvat credit on duty paid for capital goods producing products falling under Chapter Heading 52.02, even if excluded under Rule 57Q. The Court emphasized that relief should not be denied on capital goods used in manufacturing intermediate products exempt from duty but consumed in finished goods chargeable to duty. Referring to the Tribunal's decision and Circular No. 665/666 2002-CX, the Court rejected the Revenue's appeal, affirming the Tribunal's order. The Court also mentioned a previous case where the Revenue's case on a similar issue was dismissed, further supporting the rejection of the present appeal.

In conclusion, the High Court upheld the Tribunal's decision to allow modvat credit for duty paid on capital goods excluded under Rule 57Q for the production of specific products, based on the principles established in previous judgments and circulars. The Court emphasized the importance of not denying relief on capital goods used in manufacturing intermediate products exempt from duty but consumed in finished goods subject to duty, thereby dismissing the Revenue's appeal and confirming the Tribunal's order.