2010 (3) TMI 274 - HC - Central Excise

Modvat / Cenvat Credit - heating elements, emery belt, fire clay, graphite powder, aluminium powder, grinding wheel, plastic tape and mold cote eligible inputs goods not falling within the category of capital goods held that that the manufacturer is entitled to claim the modvat credit on such finished excisable goods as the Central Govt. may notify and the credit of specified duty under this section shall be allowed on the inputs used in the manufacture of final products as well as on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final product or not decided in favor of assessee

Summary

Issues:
1. Eligibility of various items for modvat credit under Rule 57A.
2. Admissibility of items covered in the excluded category for modvat credit.

Issue 1: Eligibility of various items for modvat credit under Rule 57A

The Customs, Excise and Gold (Control) Appellate Tribunal referred the question of law to the court regarding the qualification of items like heating elements, emery belt, fire clay, graphite powder, etc., declared as inputs under Rule 57A for modvat credit. The court examined Rule 57-A, which allows manufacturers to claim modvat credit on finished excisable goods and inputs used in or in relation to the manufacture of final products. Section 57B specifies that the manufacturer can take credit of specified duty paid on inputs used directly or indirectly in manufacturing final products. The court cited the case of Collector of Central Excise, Bangalore vs. Escorts Mahle Ltd., where it was held that materials used in manufacturing final products qualify as inputs for modvat credit. The court also referenced the case of M/s Jaypee Rewa Cement v. Commissioner of Central Excise, M.P., where inputs used in manufacturing intermediate products were deemed eligible for modvat credit. Consequently, the court ruled in favor of the manufacturer, affirming their entitlement to claim modvat credit on the mentioned items.

Issue 2: Admissibility of items covered in the excluded category for modvat credit

The court considered whether items falling within the excluded category under the explanation to Rule 57A are eligible for modvat credit. The judgment highlighted that materials used in the manufacture of final products, even if termed as machinery or parts of machinery, are eligible for modvat credit as per legal precedents. Drawing from previous decisions, the court emphasized that inputs used in the production of intermediate products, which are further utilized in the manufacturing process, are entitled to modvat credit. Consequently, the court concluded that the manufacturer is entitled to claim modvat credit on items covered in the excluded category, ruling in favor of the assessee and against the revenue authorities.

In conclusion, the judgment clarified the eligibility criteria for modvat credit under Rule 57A and affirmed the manufacturer's right to claim such credit on various items used in the manufacturing process. The decision underscored the broad interpretation of inputs for modvat credit purposes, aligning with established legal principles and precedents set by higher courts.