2010 (3) TMI 633 - HC - Central Excise

Modvat Credit On Machine, machinery, plant, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of final products - under exclusion clause of Explanation to Rule 57 Held that - Manufacturer can avail cenvat credit.

Summary

Issues: Interpretation of Modvat Credit under Explanation to Rule 57A

Analysis:
1. The Customs, Excise & Gold (Control), Appellate Tribunal referred a substantial question of law to the High Court regarding the eligibility of certain items for Modvat Credit under the exclusion clause of Explanation to Rule 57A.
2. Rule 57-A provides an incentive to manufacturers for expanding their business premises in India. It allows manufacturers to claim Modvat credit on specified excisable goods notified by the Central Government and on inputs used in or in relation to the manufacture of final products, whether directly or indirectly.
3. Section 57B allows manufacturers to take credit of specified duty paid on inputs used in the manufacture of final products, but not on machines, machinery, equipment, apparatus, tools, appliances, or capital goods.
4. The High Court cited the case of Collector of Central Excise, Bangalore v. Escorts Mahle Ltd., where the Supreme Court held that materials used in the manufacture of final products are eligible for Modvat credit as inputs.
5. The High Court also referred to another case where a Division Bench held that Modvat credit can be availed for items like mortar, castable powder, refractory, ramming mass, foundry flux, and chemicals under Rule 57A.
6. Considering the above precedents, the High Court held that items like foundry flux, IR, mix, refractories, and mortar used in the furnace for manufacturing final products are eligible for Modvat credit. The judgment favored the assessee, allowing them to claim the credit against the revenue.