2012 (12) TMI 266 - HC - Central Excise

Hot Melt Unit - Capital Goods - Rule 57-Q - held that - Marketability is an essential criterion for determining the liability of goods to excise duty and the process of rendering goods to market is a manufacture - end products manufactured by the respondents cannot be marketed without proper packing and therefore the modvat credit on the impugned machine used for packing of such goods is admissible as capital goods under Rule 57-Q. - The denial of the credit for this reason therefore cannot be sustained . In the present case Hot Melt Unit was admittedly used by the assessee while packing their finished goods - welding electrodes . Since packing is held to be one of the essential components of the manufacturing process of the finished goods and being in the nature of incidental or/and ancillary to the main manufacturing activity, the assessee in this case was rightly held entitled to claim modvat credit on the item - Hot Melt Unit treating the same as capital goods under the Rule 57-Q ibid for claiming benefit - issue sought to be urged by the applicant (revenue) no longer remains resintegra - no referable question of law arises in the case - reference application fails and is accordingly dismissed. Decision in EASTEND PAPER INDUSTRIES Versus COLLECTOR OF C. EX., CALCUTTA 1989 (8) TMI 81 - SUPREME COURT OF INDIA and Dharampal Satyapal v. Commissioner of Central Excise, Delhi- I, New Delhi 2005 (4) TMI 66 - SUPREME COURT OF INDIA followed.

Summary

Issues:
Interpretation of modvat credit under Rule 57-Q for capital goods in the context of manufacturing activities.

Analysis:
The case involved a reference application by the Revenue under Section 35-H(1) of the Central Excise Act, 1944, arising from an order passed by the Tribunal. The dispute centered around the eligibility of an item, "Hot Melt Unit," for modvat credit claimed by the assessee as capital goods under Rule 57-Q. The Revenue contended that the item was used for packing welding electrodes and not in the manufacturing process, thus ineligible for modvat credit. However, the Commissioner of appeals and subsequently the Tribunal ruled in favor of the assessee, allowing the modvat credit. The Tribunal's decision was based on the necessity of proper packing for marketability, aligning with Supreme Court precedents emphasizing marketability as a crucial aspect of manufacturing. The Tribunal's decision was further supported by Supreme Court judgments, including the importance of marketability and the essentiality of packing in the manufacturing process.

The Tribunal's decision was deemed appropriate as it aligned with established legal principles laid down by the Supreme Court. The Supreme Court's rulings emphasized that activities essential for marketability are integral to the manufacturing process and qualify for benefits under relevant provisions. In this case, the Tribunal correctly recognized the significance of packing in the manufacturing process of welding electrodes, justifying the assessee's entitlement to claim modvat credit on the "Hot Melt Unit." The Tribunal's decision was consistent with the legal framework established by the Supreme Court, making the Revenue's application for a reference redundant. The Tribunal's decision was upheld, dismissing the reference application and emphasizing the need for alignment with established legal precedents in resolving similar issues.

Therefore, the Tribunal's decision was upheld, emphasizing the importance of marketability and the essentiality of activities like packing in the manufacturing process to determine eligibility for modvat credit on capital goods. The reference application by the Revenue was dismissed, highlighting the need for decisions to be in line with established legal principles, as demonstrated by relevant Supreme Court judgments.