2010 (5) TMI 8 - SC - Central Excise

Cenvat Credit / Modvat Credit Capital Goods Eligible capital goods for availing credit - The Revenue s contention is that for the months of November and December, 1999, the Assessee had taken Modvat Credit on ineligible capital goods amounting to ₹ 8,42,843/-. The further contention of the Revenue is that the Assessee was not entitled to such credit, inasmuch as, it had taken Modvat Credit on items which did not come within the purview of capital goods under Rule 57Q of the Central Excise Rules, 1944, although it was claimed by the Assessee that the said items comprised components, spares and accessories within the meaning of Explanation 1(d) of Rule 57Q (1) relating to capital goods. the short point involved in these appeals relates to the eligibility of the Assessee for Modvat Credit on certain capital goods which were said to have been used as components, spares and accessories in the manufacturing process of the Appellant for the period in question Held that In order to avail of Modvat/Cenvat credit, an Assessee has to satisfy the Assessing Authorities that the capital goods in the form of component, spares and accessories had been utilized during the process of manufacture of the finished product - , in this case the Appellant was not able to identify the machinery for which the goods in question had been used. In the absence of such identification, it was not possible for the Assessing Authorities to come to a decision as to whether Modvat Credit would be given in respect of the goods in question Decided in favor of revenue

Summary

Issues:
Eligibility of Appellant for Modvat Credit on certain goods for Nov-Dec 1999.

Analysis:
1. The Appellant, engaged in cement manufacturing, claimed Modvat Credit on goods in Nov-Dec 1999. Revenue alleged credit on ineligible capital goods. Show cause notice issued for disallowing credit and imposing penalties.

2. Assessee contended that inputs used in manufacturing final products were eligible for Modvat Credit. Assistant Commissioner disallowed credit on certain items. Commissioner (Appeals) upheld the decision, stating the items were not capital goods. CESTAT also upheld the decision.

3. Assessee appealed before Supreme Court, citing precedents like Jaypee Rewa Cement and Vikram Cement cases. Assessee argued that goods were components and accessories used in the manufacturing process, eligible for Modvat Credit under Rule 57Q.

4. Respondent argued that Assessee failed to specify machinery for which goods were used, a prerequisite for Modvat Credit. Citing Vikram Cement case, Respondent contended that goods not satisfying conditions for capital goods couldn't claim credit.

5. Supreme Court observed that Assessee couldn't identify machinery for which goods were used, hindering credit eligibility determination. Court upheld Tribunal's decision, dismissing the appeals. No costs awarded.

This judgment clarifies the importance of identifying specific machinery for claiming Modvat Credit on capital goods. It emphasizes the need for Assessees to demonstrate the utilization of goods as components, spares, or accessories in the manufacturing process to avail of such credits. The decision reaffirms the principles established in previous cases and highlights the significance of complying with the requirements set forth in the relevant rules for claiming tax credits.