1996 (5) TMI 256 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Fork Lifts for Modvat credit u/r 57Q read with Rule 57S.
2. Interpretation of the term "capital goods" under Rule 57Q.
3. Application of Supreme Court judgment in Collector of Central Excise v. Rajasthan Chemical Works.

Summary:

1. Eligibility of Fork Lifts for Modvat credit u/r 57Q read with Rule 57S:
The appeal concerns the grant of Modvat credit for Fork Lifts used in the respondents' factory. The lower authority granted this credit, referencing the Supreme Court's judgment in Collector of Central Excise v. Rajasthan Chemical Works, which recognized the use of machinery in relation to the manufacture of final products. The lower authority noted that the amendment to Rule 57S by Notification No. 23/94-C.E. (N.T.) expanded the definition of capital goods to include machinery used in or in relation to the manufacture of final products.

2. Interpretation of the term "capital goods" under Rule 57Q:
The Revenue argued that the amendment to Rule 57S did not alter the scope of Modvat benefits under Rule 57Q, which initially covered only specific items like Moulds & Dies, Generating Sets, and weigh bridges. The Revenue contended that Fork Lifts, used merely for transporting raw materials, do not qualify as capital goods under Rule 57Q. The learned SDR emphasized that capital goods must be used for producing or processing inputs or bringing about changes in substances for manufacturing final products.

3. Application of Supreme Court judgment in Collector of Central Excise v. Rajasthan Chemical Works:
The respondents' consultant argued that the Supreme Court's judgment should apply, where the use of pumps for lifting brine solution was deemed essential for manufacturing sodium sulphate. The Court held that any activity integral to the manufacturing process, even if preliminary, should be considered part of the manufacturing process. The consultant asserted that Fork Lifts, essential for transporting heavy raw materials, should similarly be considered as used in relation to manufacturing the final product.

Judgment:
The Tribunal acknowledged initial doubts about Fork Lifts qualifying as capital goods under Rule 57Q. However, it recognized the broader intent of the Modvat Scheme to alleviate the cascading effect of duty on the industry. The Tribunal concluded that equipment integral to the manufacturing process, without which the final product could not be manufactured, should qualify for Modvat credit. The Tribunal remanded the case to the lower authority to verify if the use of Fork Lifts is essential in the respondents' factory. The appeal was dismissed with these observations.