2001 (11) TMI 92 - HC - Central Excise

Summary

Issues Involved:
1. Power of the Tribunal to allow Modvat credit under Rule 57Q of the Central Excise Rules, 1944.
2. Classification of voltage regulators as capital goods under Rule 57Q.
3. Interpretation of the term "accessories" in the context of capital goods.

Detailed Analysis:

1. Power of the Tribunal to Allow Modvat Credit:
The application under Section 35H(1) of the Central Excise Act, 1944, arose because the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) rejected the applicant's application under Section 35G(3) of the Act. The question posed was whether the Tribunal has the power to allow the benefit of Modvat credit to goods not specifically mentioned in Rule 57Q of the Central Excise Rules, 1944. The Tribunal, following its earlier decision in the case of CC Jaipur v. Shanti Synthetics, held that voltage stabilizers/voltage regulators qualify as capital goods under Rule 57Q and are thus eligible for Modvat credit.

2. Classification of Voltage Regulators as Capital Goods:
The facts were undisputed that the articles in question were voltage regulators used by the assessee in their factory to regulate the voltage of electricity flow to machines used in textile manufacturing. The Assessing Officer initially denied the Modvat credit, stating that the equipment was not directly involved in the manufacture of the final product. However, the Commissioner of Customs (Appeals) overturned this decision, concluding that voltage stabilizers are essential for the proper functioning and maintenance of machines, thereby ensuring regular and proper production of the final product. This decision was upheld by the Tribunal.

3. Interpretation of the Term "Accessories":
The court examined the definition of "capital goods" under Rule 57Q, which includes machines, machinery, plant, equipment, apparatus, tools, or appliances used for producing or processing any goods or for bringing about any change in any substance for the manufacture of final products. The definition also includes components, spare parts, and accessories of such machines. The court noted that the term "accessories" is not specifically defined in the Act but is generally understood to mean something that aids or contributes to the functioning of a machine in a subordinate degree. The court cited various dictionaries and judicial precedents to support this interpretation, concluding that voltage stabilizers, which contribute to the efficient use of machines, qualify as accessories and thus as capital goods under Rule 57Q.

Conclusion:
The court found that the question of law raised about the interpretation of the provisions defining capital goods under Rule 57Q was self-evident from the language of the provision. The voltage stabilizers are considered capital goods as accessories to the machines used in the manufacture of textiles by the assessee and are thus entitled to Modvat credit under Rule 57Q. Consequently, the application was rejected.