2010 (3) TMI 272 - HC - Central Excise

Modvat / Cenvat Credit parts of machines/machinery capital goods Held that the material being used for manufacture of inputs in respect of explosives is termed as machinery - even parts of machinery would be eligible for modvat credit - the manufacturer would be entitled to claim modvat credit.

Summary

Issues:
Interpretation of Rule 57A of the Central Excise Rules, 1944 regarding availing MODVAT Credit on parts of machines/machinery.

Analysis:
The High Court was tasked with adjudicating on whether parts of machines/machinery are eligible for availing MODVAT Credit under Rule 57A of the Central Excise Rules, 1944, despite an Explanation under the same rule seemingly excluding them from eligibility. The Court examined the provisions of Rule 57-A, which grant incentives to manufacturers, allowing them to claim MODVAT credit on finished excisable goods as notified by the Central Government. The credit of specified duty is permitted on inputs used in the manufacture of final products, directly or indirectly, and whether contained in the final product or not.

Analysis (contd.):
Section 57B elaborates on the allowance of credit for specified duty paid on inputs used in or in relation to the manufacture of final products, with certain exceptions. Notably, as per section 57B(2), duty paid on machines, machinery, equipment, apparatus, tools, appliances, or capital goods is excluded from credit eligibility for the manufacturer of final products. However, the Court referred to the decision in Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd. where the Supreme Court held that materials used in the manufacture of final products qualify as inputs eligible for MODVAT credit.

Analysis (contd.):
The Court also cited the case of M/s Jaypee Rewa Cement v. Commissioner of Central Excise, M.P., where the Supreme Court ruled that inputs used in the manufacture of intermediate products, subsequently utilized in the production of final goods, are entitled to MODVAT credit. Drawing from these precedents, the High Court concluded that manufacturers can claim MODVAT credit, including on parts of machinery, machinery, or equipment used in the manufacturing process. Consequently, the judgment favored the assessee and went against the revenue department.

This detailed analysis of the judgment provides a comprehensive understanding of the legal interpretation and application of Rule 57A in the context of MODVAT Credit eligibility for parts of machines/machinery, as determined by the High Court of Punjab & Haryana.