2001 (10) TMI 164 - AT - Central Excise

Summary

Issues involved:
The judgment involves the denial of Modvat credit on capital goods under Rule 57Q of the Central Excise Rules 1944 due to the absence of manufacturing dutiable final products, leading to a dispute regarding the admissibility of the credit.

Summary:
The Assistant Collector disallowed the Modvat credit on capital goods as per Rule 57Q, stating that credit is only admissible when capital goods are used in manufacturing dutiable final products. The Commissioner upheld this decision, emphasizing the necessity for capital goods to be utilized for dutiable products to claim credit. The appellants argued that they intended to use the capital goods for dutiable products once full production commenced, but the Commissioner found that the goods were initially used for exempted products. The Commissioner highlighted the amendment to Rule 57Q in 1996, specifying that credit can only be taken when capital goods are used in manufacturing excisable goods.

Upon review, it was found that the capital goods were received after the relevant date specified in Rule 57Q, thus no justification existed for denying the credit. The judgment clarified that once credit on capital goods is availed, it can be utilized as per Rule 57-S, which did not restrict the use of capital goods solely for dutiable products. Therefore, the appeal was allowed, setting aside the lower authority's orders.

This judgment underscores the importance of adhering to the specific conditions outlined in excise rules for claiming Modvat credit on capital goods and highlights the significance of utilizing such credit in the manufacture of dutiable final products to avoid disallowance.