2017 (6) TMI 900 - AT - Central Excise

MODVAT credit - capital goods - Whether the denial of MODVAT credit on capital goods imported by the appellant is admissible or not? Held that - Sub-clause (a) of the said definition states that capital goods means machines, machinery, plant equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. Thus, machineries fall within the definition of capital goods - CBEC Circular 351/67/97-CX dated 5.11.1997 states that the crucial test for allowing MODVAT credit would be whether the capital goods were covered either in terms of classification or description of capital goods as defined in Explanation to Rule 57Q. Due to doubts which arose as to whether credit is admissible on capital goods imported under Tariff Heading 98.01, as there was no corresponding Central Excise Tariff Heading, the circular was issued. The said circular also directed that on furnishing of certificate as given therein, the credit can be allowed - The appellants having furnished the certificate, there is no reason to disallow the credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of MODVAT credit on capital goods imported by the appellant.

Analysis:
The case involved a dispute regarding the admissibility of MODVAT credit on capital goods imported by the appellant. The appellants, engaged in the manufacture of photographic positive film and paper, imported goods under Project Import Regulation, 1986. The department contended that the goods were not specified in Rule 57Q of the Central Excise Rules, 1944, making the appellants ineligible for credit. The original authority allowed the credit, stating that the imported goods were used for manufacturing final products specified in Rule 57Q. However, the Commissioner (Appeals) directed the appellants to provide a specific certificate as per CBEC Circular 351/67/97-CX. The appellants submitted the certificate issued by a Cost Accountant, but the Commissioner (Appeals) found it inadequate and disallowed the MODVAT credit.

The appellant's counsel argued that the delay in filing the certificate was due to a prior extension request and that the certificate met the requirements of the CBEC circular. On the other hand, the department contended that the certificate lacked essential details like the description of capital goods and relevant Central Excise Tariff Heading. After reviewing the certificate and relevant rules, the Tribunal found that the goods listed in the certificate, such as machinery and parts, fell within the definition of capital goods under Rule 57Q. The Tribunal noted that the CBEC circular aimed to address confusion regarding credit on goods imported under Tariff Heading 98.01 and allowed credit based on estimated values when separate invoices were unavailable.

Considering the circumstances and the purpose of the CBEC circular, the Tribunal concluded that the appellants' certificate satisfied the requirements for claiming MODVAT credit. As the goods listed in the certificate aligned with the definition of capital goods and the circular's intent, the Tribunal set aside the decision disallowing the credit and allowed the appeal with any consequential relief.