2008 (6) TMI 213 - HC - Central Excise

Whether plates/Rounds, TOR Steel, Channels, Angles, Sheets, Industrial Cables, Fuses, Plugs, Sockets, Electric Machinery used in Hydraulic system Motor Pumps/Electrical Motors 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 products or which found no mention under sub-clause (d) to clause (1) under explanation to Rule 57Q of the Central Excise Rules, 1944? Held that - 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:
Central Excise Reference under Section 35H(1) read with Rule 218 of Central Excise Act, 1944 regarding the definition of 'capital goods' and modvat credit eligibility.

Analysis:
The case involved a Central Excise Reference concerning the definition of 'capital goods' under Rule 57Q of the Central Excise Rules, 1944. The dispute arose when M/s. Gujarat Ambuja Cement Ltd. claimed modvat credit on certain goods, which the authorities contended did not fall within the definition of 'capital goods'. A show cause notice was issued, and after contesting, the Deputy Commissioner partially allowed the modvat credit but disallowed a portion, directing recovery. The respondents appealed, and the Commissioner upheld the Deputy Commissioner's order, leading to further challenge by the petitioner.

The key issue revolved around whether the items claimed by the respondents qualified as 'capital goods' under Rule 57Q. The 'CEGAT' referred to previous decisions to support the classification of the items as 'capital goods'. The Commissioner's decision was deemed valid based on established legal precedents. However, the petitioner argued against this classification, emphasizing the specificity of items listed under the explanation clause of capital goods in Rule 57Q.

The Supreme Court's decision in Commissioner of Central Excise, Coimbatore v. Jawahar Mills Ltd. was cited, highlighting the importance of the user's role in determining whether items qualify as capital goods. While the Supreme Court indicated a liberal interpretation of the explanation clause, the petitioner stressed the specific nature of items listed in the clause. The analysis of the items in question, including plates, steel, cables, and machinery, was crucial in determining their classification as capital goods.

After considering the arguments and evidence presented, the High Court upheld the 'CEGAT's decision, affirming that the items claimed by the respondents indeed fell within the definition of capital goods. The judgment favored the respondents, concluding that the benefits claimed were rightly categorized as capital goods. Consequently, the Central Excise Reference was disallowed, resolving the issue in favor of the respondent.