2015 (11) TMI 597 - AT - Central Excise

Disallowance of MODVAT Credit - Charging machine - Capital goods - Held that - On the issue of admissibility of modvat credit under Rule 57Q in respect of material handling equipment. In the present case also charging machine is used as a material handling machine therefore as per the use of the machine as well as issue supported by various judgments, the credit is admissible. As regard lathe machine, it is used for maintenance of rollers which is used in the rolling mills directly in relation to the manufacture of final product - use of the machine is not under dispute that the charging machine is used for transporting aluminium coil into the furnace and taking out coils after annealing from the furnace. The annealing process is vital process in the entire manufacturing process of the aluminium product in the appellant s factory. Annealing process cannot be carried out without using charging machine therefore in my view charging machine is directly used in the manufacture of final product i.e. aluminium product in the factory of the appellant. - even machine used in the work shop for maintenance are eligible for the modvat credit. I am therefore of the considered view that both the items i.e. Charging machine and lathe machine are qualified as capital goods and squarely covered under the of definition of capital goods provided under 57Q of Central Excise Act, 1944, hence eligible for modvat credit, therefore the impugned order is modified - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of modvat credit on charging machines and lathe machines by the Commissioner of Central Excise & Customs, Nagpur.

Analysis:
The appellant, a manufacturer of aluminum products, appealed against the disallowance of modvat credit on charging machines and lathe machines. The appellant argued that the charging machine is essential for transporting aluminum coils for annealing, a crucial step in the manufacturing process. The appellant cited several judgments supporting the admissibility of modvat credit for material handling equipment. The Tribunal agreed that the charging machine is directly used in the manufacturing process of aluminum products and qualifies as a capital good under Rule 57Q of the Central Excise Rules, 1944. Therefore, the modvat credit for the charging machine was allowed.

Regarding the lathe machine, used for maintenance of rollers in the manufacturing process, the appellant argued that regular maintenance is essential due to the frequent defects in rollers during production. The Tribunal acknowledged the importance of maintenance in the manufacturing process and noted that the lathe machine is integral for ensuring the continuous operation of rollers directly used in the final product. The Tribunal distinguished the present case from a previous judgment by highlighting that even machines used for maintenance in the workshop are eligible for modvat credit. Consequently, the Tribunal concluded that both the charging machine and lathe machine qualify as capital goods under Rule 57Q and are eligible for modvat credit. As a result, the impugned order disallowing the credit was overturned, and the appeal of the appellant was allowed.