1997 (7) TMI 323 - AT - Central Excise

Summary

Issues:
Interpretation of the term "capital goods" under Explanation 1(a) to Rule 57Q of the Central Excise Rules for the purpose of availing credit on fully automatic control panels.

Detailed Analysis:

The appellants, engaged in manufacturing various chemicals, were issued show cause notices regarding the credit availed on fully automatic control panels, questioning their classification as capital goods under Explanation 1(a) to Rule 57Q of the Central Excise Rules. The authorities contended that these panels were not used for producing or processing goods but only for starting a 150 KW motor, thus not meeting the definition of capital goods. The appellants argued that the panels were essential for limiting starting current during the motor's startup, which required high initial current drawal and automatically switched to running mode after a few seconds. The authorities below denied the credit, emphasizing the lack of direct involvement in the production or processing of goods.

In a similar case, the Tribunal had previously ruled in CCE, Meerut v. Nav Bharat Paper Mills that electronic panel boards regulating electric supply were capital goods essential for machine operation and production, eligible for Modvat credit under Rule 57Q. Another case, Modi Alkalies and Chemicals Ltd. v. CCE, Jaipur, established that switches in a panel board in a chemical plant were components/spare parts eligible for credit under Explanation 1(b) to Rule 57Q. The appellant's counsel cited these precedents, arguing that if switches were considered part of machines, denying credit on the entire panel board was unjustified. Referring to Commissioner of Central Excise v. Modi Xerox Ltd., where Modvat credit was allowed on control/distribution panels of generator sets, the counsel requested the denial of credit on fully automatic control panels be overturned.

The learned DR upheld the lower authorities' findings but failed to present any contrary judgments regarding fully automatic control panels. Considering the consistent rulings of the Tribunal in favor of similar items, the presiding judge, Ms. Jyoti Balasundaram, concluded that the appellants were entitled to credit as the panels fell within the definition of capital goods under Explanation 1(a) of Rule 57Q. The impugned orders were set aside, and the appeals were allowed with any consequential relief due to the appellants as per the law.