2005 (6) TMI 562 - AT - Central Excise

Summary

Issues: Availability of capital goods credit for preparatory machines used in the manufacture of carded/combed cotton ("silver") captively consumed in the manufacture of cotton yarn prior to 21.10.1994 under Rule 57Q.

In the present case before the Appellate Tribunal CESTAT, CHENNAI, the main issue revolves around the availability of capital goods credit for preparatory machines used in the manufacture of carded/combed cotton ("silver") captively consumed in the manufacture of cotton yarn prior to 21.10.1994 under Rule 57Q. The Revenue contends that prior to 21.10.1994, "silver" was not a specified final product under Rule 57Q, thus making any machine used for its manufacture ineligible for Modvat credit. However, the lower appellate authority, citing Tribunal's Final Order No. 919 to 927/2003 in the case of Commissioner v. Sudharsanam Spinning Mills Ltd., has held that Modvat credit of duty paid on capital goods used for the manufacture of "silver" is admissible to the yarn manufacturer if the capital goods were received in the factory before the specified date. The appellant points out that the department has appealed to the High Court against the said final order, indicating that the issue is not yet finalized.

During the proceedings, the Ld. SDR reiterates the Revenue's grounds, emphasizing the ineligibility of Modvat credit for capital goods used in the manufacture of "silver" prior to the specified date. Conversely, the Ld. Counsel for one of the respondents argues that there is no stay on the operation of the Tribunal's decision in Sudharsanam Spinning Mills Ltd., and refers to the decision in Sri Shanmuga Mills Pvt. Ltd. v. Commissioner, where it was held that capital goods credit was available for "speed frames" used in the preparatory stage of manufacturing cotton yarn before 21.10.1994. Since there is no stay on the operation of these Tribunal decisions, the case law mandates following these precedents. Consequently, the impugned orders are upheld, and the appeals by the Revenue are dismissed.

In conclusion, the Appellate Tribunal CESTAT, CHENNAI, in its judgment, delves into the intricacies of Modvat credit eligibility for capital goods used in the production of "silver" for the manufacture of cotton yarn before 21.10.1994 under Rule 57Q. The conflicting arguments presented by the Revenue and the respondents are carefully considered, with a significant emphasis on the applicability of previous Tribunal decisions and the absence of a stay on their operation. The judgment ultimately affirms the lower appellate authority's decision, highlighting the importance of following established case law in determining the availability of Modvat credit for such capital goods.