2010 (12) TMI 222 - AT - Central Excise

Cenvat Credit Assesse has a manufacturer of Glass bottles Assessee has taken credit on capital goods - The department was of the view that these items are not parts or accessories of the machinery for manufacturing glass or glassware and since headings/sub headings under which these items fall are excluded from the purview of Serial No.1 to 4 of the Table annexed to Rule 57Q of Central Excise Rules 1944 the same cannot be treated as capital goods and therefore the same would not be eligible for capital goods mdovat credit Held that from the use of the disputed items it is seen that they are integral part of machinery used for manufacturing of glass bottles though the individually these items fall in the heading/sub headings which are excluded from serial No.1 to 4 of the Table annexed to Rule 57Q of Central Excise Rules 1944 Appeal are allowed

Summary

Issues: Eligibility of modvat credit as capital goods or inputs for specific items received by the appellant.

The judgment involved the appellant, engaged in manufacturing glass bottles and other items chargeable to Central Excise duty, who availed modvat credit for duty paid on inputs and capital goods. The dispute arose from items received during specific periods, including Automatic I.T. spraying machine, Cylinders containing gases, Computer Console-740 PLC, and thermotracers. The department contended that these items were not parts or accessories of machinery for manufacturing glass or glassware, thus not eligible for capital goods modvat credit. Show cause notices were issued, denying modvat credit, confirming demands, and imposing penalties. The Commissioner (Appeals) upheld the Assistant Commissioner's orders, leading to the filing of appeals by the appellant.

The appellant argued that the disputed items were components of machinery for manufacturing glass and glassware, eligible for modvat credit under relevant rules. They referenced a Board Circular to support their position and contested the imposition of penalties based on interpretation issues. On the other hand, the department argued that the items fell under excluded headings/subheadings, making them ineligible for capital goods modvat credit or as inputs for manufacturing finished goods. They justified the denial of modvat credit and imposition of penalties based on the appellant's incorrect claims.

After hearing both sides and examining the records, the judge noted the disputed items' tariff classifications and their exclusion from specified categories in the Central Excise Rules. Despite falling under excluded headings/subheadings, the judge found that the items were integral parts of machinery used for manufacturing glass bottles. Referring to a Board Circular, the judge concluded that the disputed items qualified as components, spares, and accessories of machinery for glass bottle manufacturing, regardless of their specific headings/subheadings. Consequently, the judge ruled in favor of the appellant, overturning the denial of capital goods modvat credit and allowing the appeals.

In summary, the judgment resolved the issue of eligibility for modvat credit as capital goods or inputs for specific items received by the appellant during the disputed periods. The decision favored the appellant, recognizing the disputed items as integral components of machinery for glass bottle manufacturing, thereby entitling them to capital goods modvat credit despite their exclusion from specified categories in the Central Excise Rules.