1997 (7) TMI 340 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on "Insulated Copper Cables" by Assistant Commissioner.
2. Interpretation of the definition of capital goods under Rule 57Q of the Central Excise Rules, 1944.
3. Argument regarding the essentiality of insulated cables and wires in the manufacturing process.
4. Comparison with previous Tribunal judgments on the definition of capital goods.

Analysis:
The case involved the denial of Modvat credit on "Insulated Copper Cables" by the Assistant Commissioner, who argued that the cables did not meet the definition of capital goods under Rule 57Q. The Department contended that the cables did not bring about any change in substance or qualify as a component part of machinery. The first appellate authority upheld this decision, leading to the appeal before the Tribunal.

During the appeal, the Appellant's representative argued that the cables were essential for running various machines in the plant and fell under the definition of capital goods as per Rule 57Q. He emphasized that without the cables, crucial machines like ring frame machines, doubling machines, and others could not operate, hindering the production process. Additionally, he cited a previous Tribunal judgment where electric wires and cables were considered capital goods.

In response, the Department's representative countered that the cables did not fit the criteria specified in the definition of capital goods under Rule 57Q. He argued that the cables were not components, spare parts, or accessories of machinery, as required by the rule.

The Tribunal analyzed the issue by referring to previous judgments, including the case of Nova Udyog Ltd. and Avi Photochem Ltd. The Tribunal noted that the definition of capital goods encompassed not only main machinery but also components and accessories essential for the manufacturing process. It highlighted that items like Densitometer, though not directly involved in production, were considered capital goods if essential for the manufacturing process. Applying this reasoning, the Tribunal concluded that the insulated cables were indeed capital goods as they were crucial for the machinery to function and, therefore, eligible for Modvat credit.

In the final decision, the Tribunal allowed the appeal, setting aside the Assistant Commissioner's order and granting the Modvat credit on the "Insulated Copper Cables." The judgment emphasized the broad interpretation of capital goods to include essential components and accessories necessary for the manufacturing process, even if they did not directly bring about changes in substances.