2004 (11) TMI 175 - AT - Central Excise

Summary

Issues: Availability of Modvat credit on specific items under Central Excise Rules

In the first appeal, the issue pertains to the availability of Modvat credit on certain items, such as rubber sheets, extruded plates and strips, and M.S. slates, under Rule 57Q of the Central Excise Rules, 1944. The Deputy Commissioner disallowed the Modvat credit on these items, leading to appeals filed by both the Revenue and M/s. D.S.M. Sugar Mills Ltd.

Analysis:
The dispute regarding the availability of Modvat credit on rubber sheets, extruded plates, and strips arose due to the Deputy Commissioner's disallowance, contending that these items did not qualify as capital goods under Rule 57Q(1) of the Central Excise Rules. The Commissioner (Appeals) allowed the Modvat credit on rubber sheets, citing their use in preventing steam leakage and maintaining pressure for manufacturing finished products. This decision was supported by a previous Tribunal ruling. Similarly, the Modvat credit on extruded strips and plates was permitted as they were used as control panels for D.C. motors. The Revenue argued that these items were neither parts nor accessories of capital goods, citing a Tribunal decision. However, the adjudicator noted that even if not classified as capital goods, these items were inputs used in the manufacturing process, making the assessee eligible for Modvat credit under Rule 57A of the Central Excise Rules. The Tribunal's precedent emphasized that goods claimed as inputs could not be considered capital goods for Modvat credit purposes. Ultimately, the Modvat credit was allowed on rubber sheets and extruded strips and plates, leading to the rejection of the Revenue's appeal.

Regarding M.S. slates, the Commissioner (Appeals) disallowed the Modvat credit, classifying them under Heading 84.31 of the Central Excise Tariff Act, which was excluded from the definition of capital goods. The appellant argued that M.S. slates were part of the bagasse feeder system and thus qualified for Modvat credit as capital goods. However, the Revenue contended that no technical evidence was presented to support this claim. The adjudicator agreed with the Revenue, noting the lack of substantial proof that M.S. slates were integral to the bagasse feeder system. As M.S. slates were classified under a heading not covered by the capital goods definition in Rule 57Q, the appeal by M/s. D.S.M. Sugar Mills Ltd. was rejected.