2001 (6) TMI 114 - AT - Central Excise

Summary

Issues: Eligibility of credit u/r 57Q on duty paid for engine and alternators used in diesel generating sets.

In the present case, the issue revolved around the eligibility of credit under Rule 57Q for the duty paid on the engine and alternators used in diesel generating sets. The respondents, engaged in manufacturing various products, had entered into contracts for installation of diesel generating sets in their factories. The department objected to the credit taken by the respondents, arguing that the components were exclusively used in the manufacture of the exempted final product, i.e., the diesel generating set, and that the manufacturers of the set were different from those taking the credit. The Commissioner (Appeals) upheld the credit taken by the respondents, relying on a previous Tribunal decision. The department appealed these decisions of the Commissioner (Appeals).

The grounds of appeal contended that the assembly of the diesel generating sets amounted to manufacture, and as the final product was exempted from duty, credit for duty paid on capital goods could not be taken. It was argued that Rule 57T(7) did not apply as the fabricator had not undertaken certain activities. However, it was acknowledged that the components were indeed used in the manufacture of the diesel generating set, which was exempt from duty. The difference in wording between Rule 57A and Rule 57Q was highlighted, emphasizing that Rule 57Q did not require the capital goods to be used in or in relation to the manufacture of the final product.

Moreover, it was argued that the components were not used exclusively in the manufacture of the generating set but rather for generating electricity required for the manufacture of other final products. Denying credit based on the department's interpretation would lead to absurd results and go against the provisions of law. The second ground raised by the department, regarding the manufacturer of the generating set being different from the one taking credit on the components, was also dismissed. It was reasoned that such an interpretation would defeat the purpose of providing credit on capital goods and was not supported by the rules.

Ultimately, the appeals were dismissed, affirming the decision that the credit taken by the respondents under Rule 57Q for duty paid on the engine and alternators used in the diesel generating sets was valid.