1996 (11) TMI 142 - AT - Central Excise

Summary

Issues:
1. Whether Modvat Credit can be allowed on capital goods not mentioned in Rule 57Q of Central Excise Rules.
2. Eligibility of Chilled Water Coil and Weighing Machine for Modvat Credit under Rule 57Q.

Analysis:
The Commissioner of Central Excise filed a Reference Application seeking clarification on the eligibility of Modvat Credit on capital goods not explicitly listed in Rule 57Q of the Central Excise Rules. The dispute arose when the respondents, manufacturers of photo-copiers, claimed Modvat credit for Chilled Water Coil and Weighing Machine, which was initially denied by the Assistant Collector but later allowed by the Commissioner of Central Excise (Appeals). The Tribunal upheld the appellate order, prompting the Reference Application.

The Departmental Representative argued that the goods in question did not qualify for Modvat Credit under Rule 57Q. Conversely, the respondents' counsel cited precedents such as the Gujarat High Court decision on humidifiers and judgments like Tata Iron & Steel Co. v. Union of India, CCE v. Rajasthan State Chemical Works, and Avery India Limited v. Commercial Tax Officer to support the contention that the items were integral to the manufacturing process.

The Tribunal examined Rule 57Q, defining capital goods broadly to include machinery, equipment, and components used in production. It noted that the Chilled Water Coils were essential for maintaining the temperature in the coating room, crucial for manufacturing photoreceptor drums. Drawing parallels with the Gujarat High Court decision on humidifiers, the Tribunal found the items in question to be vital for the manufacturing process.

Regarding the Weighing Machine, the Tribunal referenced the Avery India Limited case, emphasizing the integral role of weighing and testing machines in production. It also aligned with judgments like Tata Iron & Steel Co. and CCE v. Rajasthan State Chemical Works, which recognized the significance of machinery in the manufacturing process.

Ultimately, the Tribunal concluded that both the Chilled Water Coils and Weighing Machine qualified as capital goods under Rule 57Q, as they played essential roles in the production process. The decision did not raise any new legal questions warranting a High Court reference, leading to the dismissal of the Reference Application.