2018 (8) TMI 1582 - HC - Central Excise

MODVAT/CENVAT credit - Rule 57Q of the Central Excise Rules - Held that - Finding that the items do not qualify as capital goods is not shown to be perverse and as such the conclusion of CESTAT and denial of MODVAT credit in relation thereto cannot be held erroneous or perverse - petition dismissed.

Summary

Issues:
Dispute over admissibility of MODVAT credit for 7 items used in maintenance as part of manufacturing process.

Analysis:
1. Admissibility of MODVAT Credit: The petitioner contended that the 7 appliances/instruments used for maintenance, integral to the manufacturing process, should not have had their input credit disallowed. The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the Commissioner's order denying credit on these items, stating they were not part of the manufacturing process. The petitioner did not challenge this factual finding in the petition.

2. Legal Precedents: Reference was made to a Supreme Court judgment (AIR 2011 SCC 3286) where it was emphasized that tools/instruments must be proven to be used during the manufacturing process to qualify for credit. The Court differentiated between components classified as capital goods and those that were not essential for manufacturing. A Division Bench of the Allahabad High Court also ruled that welding electrodes used for repair work did not qualify as capital goods for credit purposes.

3. Previous Judgment: A previous judgment by the Bombay High Court in a similar case involving welding electrodes for maintenance of capital goods was cited. The Court found that the denial of MODVAT credit for items not qualifying as capital goods was not unjustified, considering the precedents and the nature of use of the items in question.

4. Conclusion: The High Court dismissed the writ petition, upholding the denial of MODVAT credit for the 7 items used in maintenance. The Court found that the items did not qualify as capital goods based on established legal principles and precedents, affirming the decision of the CESTAT. The petition was dismissed, and no costs were awarded.