1996 (10) TMI 498 - AT - Central Excise

Summary

Issues:
Whether Modvat credit is permissible on transformers under Rule 57Q before 16-3-1995.

Analysis:
The case involved a dispute regarding the eligibility of Modvat credit on transformers under Rule 57Q before 16-3-1995. The Appellants, manufacturers of abrasive materials, claimed Modvat credit on transformers used in their plant. The lower authorities denied the credit, stating that the transformers were not directly involved in the production or processing of goods. The central issue was whether transformers could be considered capital goods under Rule 57Q before the 1995 amendment.

The Appellants argued that transformers were essential for supplying electricity to their machinery, indirectly contributing to the production of abrasive materials. They contended that the definition of capital goods in Rule 57Q was broad and encompassed all machinery used in the manufacturing process. The Appellants emphasized that without the transformers, their plant could not operate, leading to the denial of Modvat credit being unjustified.

On the contrary, the Respondent argued that transformers did not fall under the definition of capital goods as per the existing Explanation I clauses (a), (b), and (c) of Rule 57Q. They highlighted that the specific inclusion of transformers exceeding 75 KVA in the 1995 amendment implied that such transformers were not eligible for Modvat credit before the change. The Respondent contended that the broad interpretation of 'plant' in the context of Rule 57Q was unwarranted and that transformers were not explicitly covered under the pre-amendment provisions.

The Tribunal referred to a previous case involving a similar issue and upheld the plea that a plant, including machinery and equipment, was entitled to Modvat credit under Rule 57Q. The Tribunal reasoned that transformers were integral to the functioning of the plant and, therefore, qualified as capital goods. The Tribunal rejected the argument that the 1995 amendment rendered the pre-amendment provisions regarding transformers null and void, emphasizing that the inclusion of specific categories in the amendment was clarificatory rather than restrictive.

In conclusion, the Tribunal allowed the Appeal, granting the Appellants the benefit of Modvat credit on transformers under Rule 57Q before 16-3-1995. The decision was based on the interpretation that transformers were essential components of the plant and fell within the ambit of capital goods as defined in the pre-amendment provisions of Rule 57Q.