2008 (9) TMI 220 - HC - Central Excise

Capital goods credit - Copper/Aluminium Conductor Impeller Bulldozer & cold frame sections held that cold frame sections which hold together the machinery and the Copper/Aluminium Conductor Impeller and Bulldozer will not fall within the definition of capital goods u/r 57Q of the CER 1944- findings of the Tribunal that these items are part of the machinery is a finding of fact. - Explanation to Rule 57Q is liberal in nature. Each case has to be decided on its own facts credit allowed

Summary

Issues:
1. Interpretation of Rule 57Q of the Central Excise Rules, 1944 regarding the eligibility of certain items as capital goods.
2. Determining whether specific items like Copper/Aluminium Conductor, Impeller, Bulldozer, and cold frame sections qualify as capital goods under Rule 57Q.

Analysis:
1. The judgment addresses the interpretation of Rule 57Q of the Central Excise Rules, 1944 concerning the classification of certain items as capital goods. The key question in Excise Reference No. 20 of 2001 was whether Modvat Credit could be allowed on items like Copper/Aluminium Conductor, Impeller, and Bulldozer during September 1995, even though they were not initially considered eligible as capital goods under Rule 57Q. Similarly, Excise Reference No. 1 of 2002 raised the issue of whether cold frame sections should be classified as capital goods under the same rule.

2. The court delved into the definition of capital goods under Rule 57Q, which includes machines, machinery, plant, equipment, tools, or appliances used in production or processing of goods. The explanation to the rule encompasses components and spare parts of such machinery within the definition of capital goods. The Tribunal concluded that the items in question fell under the definition of capital goods as per this section, emphasizing their essential role in the manufacturing process.

3. Referring to a previous judgment by the Apex Court, the court highlighted the liberal nature of the language used in the explanation to Rule 57Q. The court emphasized that each case must be evaluated based on its unique circumstances, and if the items in question meet the criteria outlined in the explanation, the assessee is entitled to the benefit of considering them as capital goods.

4. Drawing on a Division Bench decision in a related case, the court reasoned that items like power cables, switch gears, capacitors, and cold frame sections, which support machinery, can be deemed as capital goods. The court emphasized that the determination of whether a particular item qualifies as a capital good depends on its usage, and the Tribunal's finding that the disputed items were integral to the machinery was deemed a factual conclusion.

5. Ultimately, the court held that the items in question, including Copper/Aluminium Conductor, Impeller, Bulldozer, and cold frame sections, should be classified as capital goods under Rule 57Q. The judgment favored the assessee and ruled against the Revenue, affirming the eligibility of the disputed items for capital goods classification under the mentioned rule.

6. The court concluded the judgment by answering the references in favor of the assessee, with no specific order regarding costs. The decision provides clarity on the interpretation of Rule 57Q and sets a precedent for considering various items as capital goods based on their functional role in the manufacturing process.