2008 (6) TMI 62 - HC - Central Excise

Manufacture of Glycol and other industrial chemicals - credit in respect of (i) Laboratory Homogenizes, Lab Scientific/Hospital Equipments (ii) Module of CH 85.38 (iii) Gas Detection Systems of CH 85.31 (iv) Lube/Sealant of CH 32.14 and (v) Tower Packing of CH 84.19, for the year 1994-95- In view of the definition of capital goods as it existed prior to 23-7-1996, and accepted by the SC in Jawahar Mills Ltd. case, credit cannot be denied revenue appeal dismissed

Summary

Issues:
Interpretation of the definition of 'capital goods' under Rule 57Q of the Central Excise Rules, 1944 before and after the amendment dated 16-3-1995.

Analysis:
The case involved an appeal under Section 35G of the Central Excise Act, 1944 against an order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding Modvat credit availed by a manufacturer of industrial chemicals. The dispute arose from the disallowance of certain credits by the department, leading to an appeal by the assessee before the Commissioner (Appeals) and subsequently before the CESTAT. The main contention was whether the amended definition of 'capital goods' introduced by Notification No. 11/95-C.E. (N.T.) dated 16-3-1995 could be applied retrospectively for the year 1994-95. The items in question included laboratory equipment, gas detection systems, and other machinery used in the manufacturing process.

The appellant argued that the retrospective application of the amended definition was erroneous in law, emphasizing that the liberal interpretation of 'capital goods' prior to the amendment should not be altered. However, the respondent contended that the definition remained broad even before the amendment, citing relevant case law to support their position. The court examined the evolution of the definition of 'capital goods' through various notifications and highlighted the expansive nature of the definition before the restrictive changes introduced post-1995.

By analyzing the definitions provided in Rule 57Q before and after the 1995 amendment, the court concluded that the CESTAT had not erred in allowing the Modvat credit to the assessee for the disputed items. The court relied on previous judgments and interpretations of the definition of 'capital goods' to support its decision. Ultimately, the question of law was answered in favor of the respondent, leading to the dismissal of the appeal filed by the Revenue.

In summary, the judgment delved into the interpretation of the definition of 'capital goods' under Rule 57Q of the Central Excise Rules, 1944, before and after the significant amendment in 1995. The court's detailed analysis considered the historical context, legislative changes, and relevant precedents to uphold the decision of the CESTAT regarding the Modvat credit claimed by the assessee for specific items used in their manufacturing process.