2017 (3) TMI 127 - AT - Central Excise

MODVAT credit - Fuel Supply installation falling under Chapter 8424 - parts of conveyer falling under Chapter 8431 - accessories spraying station and guns hoses falling under Chapter 8424 - article of alloy steel falling under Chapter 7326 - denial on the ground that goods of chapter 8424 and 8431 were excluded from the definition of the capital goods - Held that - From Sr. No. 2 of Table to Rule 57Q (1) it can be seen that as regard 8424.80 only fire extinguisher is excluded, therefore all goods other than fire extinguisher are included therefore credit is admissible on two items. As regard the credit on parts of conveyer, the board clarified vide Circular No. 276/110/96-TRU dated 2-12-1996 that for the purpose of parts chapter heading is immaterial if the parts accessories is of capital goods which are specified under Rule 57Q, the credit is admissible irrespective of any chapter heading therefore credit on parts of conveyor falling under chapter heading 8431 is admissible. As regard the non alloy steel, we find that this goods is not covered under any of the entry provided under Rule 57Q (1) therefore it is not capital goods, hence the credit is not admissible on this goods falling under Chapter 7326. Appeal disposed off - decided partly in favor of appellants.

Summary

Issues: Disallowance of Modvat credit for goods under various chapters. Interpretation of rules regarding capital goods and admissibility of credit. Application of saving clause in case of rule substitution.

Issue 1: Disallowance of Modvat credit for goods under various chapters
The adjudicating authority disallowed Modvat credit for goods like Fuel Supply installation, conveyer parts, spraying station, guns hoses, and alloy steel under specific chapters. The disallowance was based on the exclusion of goods from the definition of capital goods. The appellant challenged this decision.

Issue 2: Interpretation of rules regarding capital goods and admissibility of credit
The appellant argued that despite falling under certain chapters, the goods should be considered capital goods eligible for credit. For goods under Chapter 8424 and 8431, the appellant contended that the exclusion did not apply to all items, making them admissible for credit. The appellant also referenced Rule 57Q of Central Excise Rules, 1944, emphasizing that the substitution of rules did not have a saving clause, thus affecting the validity of the show cause notice.

Issue 3: Application of saving clause in case of rule substitution
The Tribunal analyzed the substitution of old rules with new ones for the Modvat scheme. It was determined that the saving clause under Section 38A applied to such amendments, contrary to the appellant's argument. Regarding the admissibility of capital goods, specific goods under different chapters were examined. The Tribunal referred to the relevant provisions of Rule 57Q and the table therein to determine the eligibility of goods for credit. It was established that certain goods fell within the definition of capital goods, while others did not, affecting the admissibility of credit accordingly.

In conclusion, the Tribunal partially allowed the appeal, modifying the impugned order to grant credit for capital goods falling under Chapter 8424 and 8431, while denying credit for goods falling under Chapter 7326. The judgment highlighted the interpretation of rules, application of saving clauses, and the specific categorization of goods under different chapters to determine the admissibility of Modvat credit.