2000 (8) TMI 227 - AT - Central Excise

Summary

Issues:
1. Admissibility of Modvat credit on Chlorine Cylinders under Rule 57Q of Central Excise Rules, 1944.

Analysis:
The case involved a dispute regarding the admissibility of Modvat credit on Chlorine Cylinders by a company manufacturing Caustic Soda, Chlorine, and Hydrochloric Acid. The Commissioner of Central Excise held that the specially designed Chlorine Cylinders, fitted with mechanical devices, were Capital Goods covered by the definition of Rule 57Q. The Revenue challenged this decision, arguing that the cylinders were merely used for storage and transportation, akin to packing material. However, the Commissioner emphasized the integral role of the cylinders in the manufacturing process, citing the necessity of filling liquified Chlorine into the cylinders for the final product to assume commercial existence. The Commissioner also referred to a Supreme Court decision emphasizing that items required to make goods marketable are part of the manufacturing process.

In their analysis, the Appellate Tribunal considered previous judgments, including one where cylinders for storing Oxygen Gas were deemed Capital Goods under Rule 57Q. Drawing on these precedents and the reasoning applied by the Commissioner, the Tribunal rejected the Revenue's appeal. They found no merit in the argument that the cylinders were merely for storage and transportation, affirming the Commissioner's decision that the Chlorine Cylinders were essential to the manufacturing process and thus eligible for Modvat credit.

The Tribunal's decision was based on the understanding that the Chlorine Cylinders, being specially designed and integral to the production process, fell within the ambit of capital goods as defined in Rule 57Q. By aligning with previous rulings and emphasizing the functional necessity of the cylinders in the manufacturing chain, the Tribunal upheld the admissibility of Modvat credit on the Chlorine Cylinders.