2004 (12) TMI 115 - AT - Central Excise

Cenvat/Modvat - inputs - capital goods - Whether the assessee can be denied the benefit of Modvat credit on duty paid inputs utilised in the manufacture/fabrication of capital goods and supporting structure, since they have been embedded to the earth and become non-excisable goods - HELD THAT - We are convinced that the supporting structure in which the various inputs were used are not civil structures. They are all supporting structures for the blast furnace and also the materials handling system. It is not necessary to describe here the function of each of the systems. Suffice to say that these supporting structures are also capital goods and the fact that they are embedded to the earth is not a sound reason for denying the Modvat credit on the inputs used. In the case of Mahalakshmi Glass Works Ltd. v. CCE, 1997 (5) TMI 286 - CEGAT, MUMBAI , it was held that there is no requirement in Rule 57Q that for credit to be taken on part of the capital goods, the capital goods themselves must be liable to duty. Hence the Commissioner (Appeals)'s reasoning that out of all the inputs the assessee manufactured non-excisable goods which are embedded to earth and hence no Modvat credit can be given, is not correct. Thus, there is no justification for denial of Modvat credit on the inputs used for the supporting structures of blast furnace and raw materials handling equipment system. In the result, the appeal of M/s. Bellary Steel Alloys Ltd. is allowed and the Department's appeal is dismissed.

Summary

Issues:
Entitlement of Modvat credit for inputs used in fabrication and erection of technological structure.

Details:
The appeals arose from the Order-in-Appeal passed by the Commissioner of Customs & Central Excise, Bangalore, regarding the entitlement of Modvat credit availed by M/s. Bellary Steel & Alloys Ltd. in relation to inputs used in the fabrication of iron and steel products. The Deputy Commissioner disallowed the credit and imposed a penalty, leading to an appeal by the assessee to the Commissioner (Appeals) who held that certain inputs were not eligible for Modvat credit. The Revenue and the assessee both appealed against this decision.

Contentions:
The learned Advocate for M/s. Bellary Steel argued that the inputs used in the fabrication and erection of various structurals should be eligible for Modvat credit, emphasizing that the capital goods manufactured were embedded to the earth for structural integrity. Reference was made to relevant case laws to support the claim.

Decision:
After considering the submissions and evidence presented, the Tribunal found that the supporting structures in question were indeed capital goods and being embedded to the earth did not disqualify them from Modvat credit eligibility. Citing precedents such as Mahalakshmi Glass Works Ltd. and Lloyds Metals & Engineers Ltd., the Tribunal concluded that denial of Modvat credit on inputs used for supporting structures was unjustified. Relying on case laws like Star Paper Mills Ltd. and New J.K. Cement Works, the Tribunal allowed the appeal of M/s. Bellary Steel & Alloys Ltd. and dismissed the Department's appeal.