2006 (12) TMI 86 - HC - Central Excise

Credit on the tyres, tubes & flaps received as a part of capital goods(loader) - eligibility of the tyres, tubes & flaps used as components, spares & accessories of goods can t be denied since it can t be disputed in view that loaders in question which is the principal CG used in manufacture of specified goods at the factory & used all articles in question as components, spares and accessories of the loaders - subsequent insertion of Rule 57AA couldn t affect eligibility of CG to avail credit

Summary

Issues:

1. Interpretation of Rule 57Q of the Central Excise Rules, 1944 regarding availing modvat credit on tyres, tubes, and flaps used as spares/accessories of loaders.
2. Whether the eligibility of modvat credit on spare/accessory goods is dependent on falling within specific tariff items under Rule 57Q.

Analysis:

Issue 1: The primary issue in this case revolves around the interpretation of Rule 57Q of the Central Excise Rules, 1944 concerning the eligibility of availing modvat credit on tyres, tubes, and flaps used as spares or accessories of loaders. The assessee claimed modvat credit on these items as spares/accessories of loaders, which were considered capital goods. The adjudicating authority initially denied the credit, stating these items did not fall under the list of capital goods specified in Rule 57Q. However, the Commissioner (Appeals) reversed this decision, allowing the modvat credit based on the classification of loaders as capital goods. The Tribunal upheld the Commissioner's decision, emphasizing the eligibility of spares and accessories of capital goods for modvat credit.

Issue 2: The second issue involves whether the eligibility of modvat credit on spare/accessory goods is contingent upon falling within specific tariff items under Rule 57Q. The Court analyzed the provisions of Rule 57Q and noted that the table under Rule 57Q(1) specifies goods eligible for modvat credit, including components, spares, and accessories of the listed items. The Court highlighted that the table does not require spare/accessory goods to independently fall within the tariff headings specified for principal goods. The Court emphasized that the eligibility of modvat credit for spare/accessory goods is based on their use in conjunction with eligible principal capital goods, irrespective of their independent classification under the Tariff Act.

In conclusion, the Court dismissed the appeal, affirming the eligibility of the assessee to avail modvat credit on tyres, tubes, and flaps used as spares/accessories of loaders under Rule 57Q. The judgment clarified that the eligibility of modvat credit for spare/accessory goods is tied to their use in connection with eligible principal capital goods, rather than their independent classification under the Tariff Act.