2004 (11) TMI 195 - AT - Central Excise

Cenvat/Modvat - Capital goods - Nature of structurals or construction materials - definition of Capital Goods under Rule 57Q - HELD THAT - The appellants' case is that the item has become part and parcel of the conveyor system and they are parts of the conveyor system. They have shown the photographs wherein it clearly shows that the structures are supportive to the conveyor systems and have become part of the structural conveyor system. The same has been manufactured as per design and specification, to be installed along with the conveyor system, so that the conveyor system can function with greater strength. In similar cases and in the case of Varalakshmi Sugars Ltd. v. CCE 2001 (8) TMI 183 - CEGAT, CHENNAI wherein the corrugated sheets made of asbestos were used for covering the heat exchanger were held to be used in or in relation to the manufacture of final product. In the case of CCE v. J.K. Cement Works 1999 (11) TMI 454 - CEGAT, NEW DELHI , the M.S. Angles, Bars, and Rods and supporting structurals were found to be supporting clinker-loading arrangements and were considered to be parts of the plant and the benefit was allowed in the light of the ruling rendered in the case of New J.K. Cement Works v. CCE 1999 (8) TMI 165 - CEGAT, NEW DELHI . In the case of CCE. v. Kasturi Sugars Ltd 2003 (2) TMI 144 - CEGAT, NEW DELHI , it was found that the M.S. structures were being used for installation of plant meant for manufacture of VP Sugar and it was found not be used for fabrication and construction purposes and hence the benefit was extended. In the case of Adarsh Industries 2001 (6) TMI 155 - CEGAT, MUMBAI , MS rod, beam, channel and angles were used as support for the furnace in which glass is melded and they were held to be parts of furnace and credit was allowed. All these ratios clearly apply to the facts of the case as structures have become parts of the conveyor system and it helps in the efficient functioning of the conveyor system. The structures on the conveyor system have been designed to function as part of conveyor systems and also to give support to the conveyor system. Therefore, the denial of credit on these structures, which are used as parts of conveyor system are not justified. Respectfully following the ratio, the said impugned order is set aside and the appeal is allowed with consequential relief, if any.

Summary

Issues involved: Denial of modvat credit for structures claimed as parts of conveyor system under Rule 57Q.

In the present case, the appellants were denied the benefit of modvat credit for structures claimed as parts of a conveyor system. The Revenue argued that these structures were in the nature of structurals or construction materials and not covered by the definition of Capital Goods under Rule 57Q.

The learned Counsel for the appellants presented evidence showing that the structures were essential for the functioning of the conveyor system and had become an integral part of it. They relied on various judgments where similar structures used for installation of machinery were considered as part of machinery, thereby granting modvat credit.

The learned SDR, on the other hand, contended that post-amendment of Rule 57Q, the structures could not be considered part of the conveyor system as they fell under Chapter 72. He cited precedents where items like HR Coils and mild steel components were considered as structurals or construction materials, leading to denial of credit.

Upon careful consideration, the Tribunal found that the impugned structures were not used for civil construction or shed erection but were integral to the conveyor system's functioning. The structures were designed and manufactured to enhance the conveyor system's strength and efficiency. Drawing parallels to previous cases involving similar components used in machinery or plant setup, the Tribunal concluded that denial of credit for the structures in question was unjustified.

Therefore, based on the evidence presented and in line with the precedents cited, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as necessary.