2017 (8) TMI 829 - HC - Central Excise

MODVAT credit - Rule 57Q - Whether the benefit of modavat under Rule 57Q would not be admissible upto 23.7.1996 following ratio of Larger Bench of the Appellate Tribunal in Jawahar Mills Ltd.Vs. CCE, 1999 (4) TMI 153 - CEGAT, NEW DELHI , holding Welding Electrodes to be capital goods upto 23.7.1996? - Held that - on perusal of the aforesaid decision, we find that it did not deal with the issue of modvat credit of capital goods under Rule 57Q, but was concerned with modvat credit on inputs in terms of Rule 57A of the Central Excise Rules. Thus the reliance upon the aforesaid decision by the Tribunal to reject the appellant s claim is not correct - there is nothing on record to indicate the exact manner in which the welding electrodes are used in the appellant s factory. CENVAT credit is dependent upon the manner of use in the manufacture of final products in the assessee s factory. This aspect viz. manner of use of welding electrodes in the appellant s factory has not been examined for the purpose of determining whether the definition of capital goods as provided in Rule 57Q of the Central Excise Rules would be satisfied. This factual determination in the context of Rule 57Q of the Central Excise Rules is necessary before determining whether the welding electrodes in case of appellant, satisfies the definition of capital goods. Therefore, question at this stage cannot be answered. The issue restored to the Commissioner to decide afresh after considering the manner in which welding electrodes are in fact used in the factory of the appellant-assessee - appeal allowed by way of remand.

Summary

Issues:
1. Challenge to the order of the Customs, Excise & Service Tax Appellate Tribunal under Section 35(G) of the Central Excise Act, 1944.
2. Interpretation of the words "used in or in relation to the manufacture" for modvat credit eligibility.
3. Eligibility of welding electrodes for modvat credit as capital goods under Rule 57Q of the Central Excise Rules.

Analysis:

1. The appeal challenges the order of the Tribunal dated 6.1.2004 under Section 35(G) of the Central Excise Act, 1944. The substantial questions of law admitted for consideration revolve around the benefit of modavat under Rule 57Q and the scope of the words "used in or in relation to the manufacture." Additionally, a question regarding the activity of extraction and crushing of Limestone as an activity of manufacture was raised by the appellant-assessee.

2. The Court rejected the request to consider the additional question raised by the appellant-assessee, emphasizing that the appeal was admitted after hearing the parties and only specific questions were considered substantial. The Court clarified that additional questions could be raised at the final hearing if deemed appropriate under Section 35(G)(4) of the Act.

3. Regarding the interpretation of the words "used in or in relation to the manufacture" for modvat credit eligibility, the Court noted that these words were not present in Rule 57Q during the relevant period. As a result, the question framed did not give rise to a substantial question of law and was dismissed.

4. The Court examined the issue of eligibility of welding electrodes for modvat credit as capital goods under Rule 57Q. While the appellant cited precedents in its favor, the Court highlighted the necessity of establishing the exact manner in which welding electrodes are used in the appellant's factory to determine eligibility. The Court emphasized that eligibility for capital goods credit is dependent on the manner of use in the manufacture of final products, which had not been examined in this case.

5. Consequently, the Court set aside the Tribunal's order disallowing modvat credit for welding electrodes and remanded the issue to the Commissioner for a fresh decision after considering the actual manner in which welding electrodes are used in the factory of the appellant-assessee. The appeal was allowed by way of remand for further examination of the eligibility of welding electrodes for modvat credit under Rule 57Q of the Central Excise Rules.