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Issues involved: The availability of Modvat credit of duty paid on Electrostatic Powder Coating Unit.
Details of the judgment: Issue 1: Availment of Modvat credit The appeal filed by the Revenue concerns the availability of Modvat credit on duty paid for an Electrostatic Powder Coating Unit used in the production of non-dutiable final products. The Assistant Commissioner allowed the credit, but the Revenue's appeal was rejected by the Commissioner (Appeals) citing Rule 57R(1) and relevant case law. Issue 2: Arguments for Modvat credit The Respondents argued that the machine could be used for both exempted and dutiable final products, emphasizing the specific finding by the Assistant Commissioner. They relied on Rule 57Q and Circular No. 199/33/96-CX to support their claim for Modvat credit on the capital goods in question. Issue 3: Rule interpretation and case law The learned Advocate highlighted that Rule 57R(1) applies only to capital goods used exclusively for exempted products, not those usable for both exempted and dutiable goods. They referenced case law to support their argument that Modvat credit should be allowed for specified final products under Rule 57Q. Issue 4: Rule compliance and declarations The Revenue contended that Rule 57R(1) prohibits credit on capital goods used for final products not subject to excise duty, and a declaration under Rule 57T(2) was required but not provided by the Respondents. Conclusion: The Tribunal noted that Modvat credit eligibility is determined at the time of capital goods receipt, and if used exclusively for exempted products, credit is not available even if the final product later becomes dutiable. The Tribunal differentiated the present case from relevant case law, concluding that the Respondents were not entitled to Modvat credit. The impugned Order was set aside, and the Appeal by the Revenue was allowed.
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