2002 (10) TMI 203 - AT - Central Excise

Summary

Issues:
- Eligibility of items as capital goods for Modvat credit under Rule 57Q during a specific period.
- Interpretation of Rule 57Q regarding items like Plates, Angles, Channels, GC Sheets, and Transformer.
- Application of legal precedents in determining eligibility for Modvat credit.

Issue 1: Eligibility of Items as Capital Goods for Modvat Credit
The appeal before the Appellate Tribunal CEGAT, New Delhi revolved around the eligibility of certain items as capital goods for Modvat credit under Rule 57Q from May 1994 to November 1995. The appellant, engaged in manufacturing sponge iron and MS ingots, claimed Modvat credit on items like CTD Bars, Channels, Plates, Joists, HR Coils, CR Coils, HR Sheets, GC Sheets, and a Transformer (11 KV). The Department disallowed the credit, leading to a dispute. The jurisdictional Commissioner held that the items were not eligible for Modvat credit under Rule 57Q, resulting in disallowance of credit amounting to Rs. 6,42,674.

Issue 2: Interpretation of Rule 57Q for Various Items
The appellant argued that most items were used for replacement of parts of manufacturing equipment and should be considered eligible capital goods under Rule 57Q. The Department contended that certain items, like Plates, Angles, Channels, and GC Sheets, were part of immovable structures and not eligible for Modvat credit. Regarding the Transformer, the Department maintained that only transformers of 75 KV and above were eligible as capital goods post a specific notification in March 1995. The Tribunal analyzed legal precedents and held that items used for replacement of parts of manufacturing equipment were eligible as capital goods, while items forming part of immovable structures were not eligible.

Issue 3: Application of Legal Precedents
The Tribunal referred to previous decisions to support its ruling. In cases like Global Sugar Ltd., Hindustan Sanitaryware Industries Ltd., and Lloyds Metals & Engineers Ltd., it was established that certain iron and steel items used in manufacturing processes were eligible for Modvat credit. The Tribunal applied these precedents to determine the eligibility of items in the current appeal. It held that items used for replacement of parts of manufacturing equipment were eligible for Modvat credit, while items forming part of immovable structures were not eligible. The Tribunal also clarified the applicability of specific clauses in Rule 57Q regarding the eligibility of the Transformer (11 KV) installed after March 1995.

In conclusion, the Appellate Tribunal CEGAT, New Delhi partially allowed the appeal, affirming the decision of the Adjudicating Authority regarding certain items' ineligibility for Modvat credit under Rule 57Q. However, it ruled in favor of the appellant regarding the eligibility of items used for replacement of parts of manufacturing equipment and the Transformer (11 KV) based on the interpretation of relevant legal provisions and precedents.