2006 (7) TMI 26 - AT - Central Excise

Central Excise Assessee used electric motors and steam turbines (as input) for manufacturing of power pump set Credit not deniable on steam turbine and spares thereof

Summary

Issues: Denial of Modvat credit on Steam Turbine and spares for manufacturing Power Driven Pumps set.

Analysis:
The appeal was filed against the order denying Modvat credit on Steam Turbine and its spares used in manufacturing Power Driven Pumps set. The appellant, a manufacturer of Power Driven Pumps, argued that the Power Driven Pump set is complete only with centrifugal force derived from either motors or Steam Turbine. The appellant availed Modvat credit on Steam Turbines used in manufacturing. However, the lower authorities and the Commissioner (Appeal) denied the credit. The appellant relied on board circulars to support their claim.

The appellant's counsel emphasized that the Power Driven Pump set requires centrifugal force, which can be provided by either motors or Steam Turbine. The department allowed Modvat credit when motors were used but sought to deny credit for Steam Turbine. On the other hand, the Departmental Representative argued that the Steam Turbine was not necessary for manufacturing the final product and was used as a spare part, justifying the denial of Modvat credit.

After considering the submissions and records, it was noted that the appellants used both electric motors and Steam Turbines in manufacturing Power Driven Pump sets. While electric motors are commonly used as prime movers, Steam Turbines were also utilized in certain cases. As long as the Steam Turbine was used in the final product and cleared for home consumption in a set, it constituted an input for manufacturing Power Driven Pump sets. Thus, there was no valid reason to deny Modvat credit on Steam Turbine and its spares used in manufacturing.

Consequently, the impugned order denying Modvat credit on Steam Turbine and its parts for manufacturing Power Driven Pump sets was set aside, and the appeal was allowed.