2018 (2) TMI 315 - HC - Central Excise

CENVAT/MODVAT credit - capital goods - Columns of heavy fabricated structures and bracings - Held that - It is not in dispute that the columns of heavy fabricated structures and bracings are used to support the boiler in the power plant of the appellant-assessee - such columns and bracings cannot be equated to civil constructions and would become a part of or an accessory to the machinery. Therefore, the denial of Modvat credit on the columns of heavy fabricated structures and bracings cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether columns of heavy fabricated structures and bracings can be considered as capital goods for Modvat credit under Rule 57Q of Central Excise Rules.
2. Whether the subject goods, being part of boilers used in manufacturing finished products, are eligible for Modvat credit.

Analysis:
1. The appellant, a power plant, sought Modvat credit for columns and bracings under Rule 57Q of the Central Excise Rules. The Tribunal denied the claim, stating these items were akin to civil construction and not capital goods. The appellant argued these components supported the boiler, integral to the power plant, making them parts or accessories of machinery. Citing a Delhi Tribunal decision affirmed by the Supreme Court, it was contended that items used in plant construction could qualify as capital goods. The High Court agreed, emphasizing the functional necessity of columns and bracings in supporting the boiler, rejecting the Tribunal's view and allowing the appeal.

2. The Tribunal upheld the denial of Modvat credit, asserting that the columns and bracings did not fall under the definition of capital goods as per Rule 57Q. The appellant contended that these components were essential for the boiler's operation and should be considered part of the machinery. By referencing a Supreme Court decision supporting a similar interpretation, the appellant argued for a broader application of the Rule. The High Court concurred, emphasizing the indispensable role of the columns and bracings in supporting the boiler within the power plant, thereby overturning the Tribunal's decision and ruling in favor of the appellant.

In conclusion, the High Court allowed the appeal, finding in favor of the appellant on both substantial questions of law. The denial of Modvat credit for columns of heavy fabricated structures and bracings was deemed incorrect, emphasizing their functional importance in supporting the boiler within the power plant. The Court's decision aligned with the broader interpretation of Rule 57Q as supported by a previous Supreme Court ruling.