2008 (6) TMI 212 - HC - Central Excise

Whether H.T. Switchgear Panel and 66 KV Breaker, Protective Chain for tyre and Logic Controller were covered under the definition of Capital Goods during the relevant period when the same were not used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product or which found no mention under sub-clause (d) of Clause (1) under explanation to Rule 57Q of the Central Excise Rules, 1944? Held that - The learned tribunal has correctly analysed that the items for which the benefits are being claimed for has rightly been arrived at to be covered under the capital goods. Therefore, in view of the above analysis, the question of law referred to above is dealt with accordingly in favour of the respondent.

Summary

Issues:
Interpretation of the definition of Capital Goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis:
The case involved a Central Excise Reference regarding the classification of certain items as Capital Goods under Rule 57Q of the Central Excise Rules, 1944. The substantial question of law raised was whether specific items like H.T. Switchgear Panel, 66 KV Breaker, Protective Chain for tyre, and Logic Controller qualified as Capital Goods during the relevant period. The petitioner contended that these items did not meet the criteria under Rule 57Q. The Tribunal had allowed Modvat credit for these items based on previous decisions and interpretations.

The petitioner argued that the goods in question were not Capital Goods as defined under Rule 57Q. They claimed that the switch gear panels were part of a generator set exceeding 75 KV, while the protection chain for tyre was used with dumpers for handling machinery, and the logic controller was solely for controlling operations related to material evacuation. The respondent, on the other hand, supported the classification of these items as Capital Goods, citing previous Tribunal decisions.

The Tribunal, relying on past cases, held that electric switches, logic controllers, and protection chains for tyres were entitled to Modvat credit as Capital Goods. The Tribunal referenced specific cases such as Kanoria Chemicals and Jindal Polymers to support their decision. The Commissioner of Central Excise challenged the Modvat credit but the Tribunal upheld its decision based on the usage and purpose of the items in question.

The Court analyzed the provisions of Rule 57Q and considered the arguments presented by both parties. They referred to the Supreme Court's decision in Commissioner of Central Excise v. Jawahar Mills Ltd. which emphasized the liberal interpretation of the term Capital Goods based on usage. The Court ultimately agreed with the Tribunal's assessment that the items in question qualified as Capital Goods, in line with the observations made by the Supreme Court. Therefore, the Central Excise Reference was disallowed in favor of the respondent, affirming the classification of the items as Capital Goods under Rule 57Q.