2005 (5) TMI 113 - AT - Central Excise

Summary

Issues: Denial of Modvat credit for capital goods used in the manufacture of exempted products.

In this judgment by the Appellate Tribunal CESTAT, Mumbai, the issue at hand involves the denial of Modvat credit for a Nitrogen generating plant used in the manufacture of exempted products. The appellant's contention is that the Nitrogen gas, an intermediate product, is captively used in the manufacture of dutiable final products. On the other hand, the revenue argues that since the final product is cleared on payment of duty while the intermediate Nitrogen gas is exempted, the credit for the plant used in manufacturing the exempted product is inadmissible.

The Tribunal refers to a circular by the Board which clarifies that Cenvat credit should not be denied on capital goods used in the manufacture of intermediate goods exempt from duty but used captively in the production of finished goods subject to duty. The Tribunal emphasizes that the revenue cannot take a stand contrary to the Board's circular. Additionally, the Tribunal cites previous decisions, such as CCE v. Sudarshanam Spinning Mills Ltd. and Bharat Forge Ltd. v. CCE, Pune, where Modvat credit for capital goods used in the manufacture of exempted intermediary products was allowed when used captively for further manufacture of dutiable final products.

Based on the above analysis, the Tribunal sets aside the impugned order and allows the appeal in favor of the appellant, M/s. Excel Industries Ltd. The penalty imposed on the second appellant, Shri Deshpande, is also set aside. This judgment underscores the importance of adhering to Board circulars and previous tribunal decisions in determining the admissibility of Modvat credit for capital goods used in the production process.