2012 (11) TMI 441 - AT - Central Excise

Plea for waiver of pre-deposit - denial of credit in respect of capital goods, used in the setting up of Oxygen Plant in the factory of the applicant on the ground that the capital goods on which credit has availed has gone into fabrication of the Plant which is not excisable - Revenue contended that no duty has been paid on the Plant and therefore not entitled for credit - Held that - In view of decision in case of CCE Vs Gujarat Ambuja Cements Ltd (2008 (10) TMI 363 - HIMACHAL PRADESH HIGH COURT) wherein it was held that if impugned good is a capital good, Rule 57Q is applicable enabling party to claim credit of duty paid on capital goods by the manufacturer of specified goods. A manufacture is entitled to claim Modvat Credit on account of the excise paid on the components, spares and accessories of the goods exempt. If duty is paid on the components used in its manufacture, we see no reason why the manufacturer cannot claim Modvat credit for such duty, applicant has made out a strong prima facie case for waiver. Pre-deposit of the dues is waived and Stay petition allowed.

Issues:
1. Waiver of pre-deposit of duty, interest, and penalty.
2. Denial of credit on capital goods used in setting up an Oxygen Plant.
3. Interpretation of Notification No. 67/95-CE regarding duty exemption.
4. Applicability of Rule 57-T(7) for availing credit on capital goods.
5. Legal precedents supporting the appellant's claim for Modvat credit.
6. Admissibility of Modvat credit for duty paid on capital goods.

Analysis:
1. The appellant sought waiver of pre-deposit of duty, interest, and penalty amounting to Rs. 4,85,00,029. The demand was confirmed due to the denial of credit on capital goods used in setting up an Oxygen Plant in the factory. The appellant, engaged in manufacturing excisable goods, argued that the fabricated capital goods used in the manufacture of final dutiable goods are exempt from duty payment under Notification No. 67/95-CE. The Tribunal's decision in a similar case supported the appellant's contention, leading to the waiver of pre-deposit and stay on recovery pending the appeal.

2. The dispute centered around the denial of credit by the Revenue on the ground that the capital goods, used in setting up the Oxygen Plant, were not excisable, and thus, not eligible for credit. The Tribunal's analysis of Rule 57-T(7) highlighted the possibility of availing credit on specified duties for capital goods used in the initial setting up of a plant for manufacturing final products. The Tribunal's decision, supported by the Himachal Pradesh High Court, emphasized the applicability of Modvat credit for duty paid on such capital goods, even if the final product was not excisable.

3. The interpretation of Notification No. 67/95-CE was crucial in determining the admissibility of credit on capital goods used in setting up the Oxygen Plant. The Tribunal's decision, upheld by the Himachal Pradesh High Court, emphasized the eligibility of the appellant to claim Modvat credit for duty paid on capital goods, despite the non-excisable nature of the final product. The Court's ruling established the applicability of Rule 57Q for claiming credit on duty paid components of capital goods, supporting the appellant's position.

4. The application of Rule 57-T(7) was pivotal in the analysis of whether the appellant could avail credit on capital goods used in setting up the Oxygen Plant. The Tribunal's interpretation of the rule allowed for the claim of Modvat credit on duty paid components, parts, and accessories of capital goods, even if the final product was not subject to excise duty. This interpretation, supported by legal precedents and the Himachal Pradesh High Court, reinforced the appellant's right to claim credit on such capital goods.

5. Legal precedents, including the Tribunal's decision in the case of Gujarat Ambuja Cements Ltd, supported the appellant's claim for Modvat credit on duty paid components of capital goods used in setting up the Oxygen Plant. The decisions of various courts in favor of manufacturers claiming Modvat credit on similar grounds further strengthened the appellant's case for waiver of pre-deposit and stay on recovery pending the appeal.

6. The admissibility of Modvat credit for duty paid on capital goods, despite the non-excisable nature of the final product, was a key aspect of the judgment. The Himachal Pradesh High Court's ruling, based on the applicability of Rule 57Q and the eligibility to claim credit on duty paid components of capital goods, established a strong prima facie case for the appellant. The decision to waive pre-deposit and stay recovery pending the appeal was based on the legal precedents and interpretations supporting the appellant's claim for Modvat credit on the capital goods used in setting up the Oxygen Plant.

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