1997 (9) TMI 255 - AT - Central Excise

Summary

Issues:
1. Eligibility of refractories used for lining arc furnace for Modvat credit.
2. Interpretation of Rule 57Q and Rule 57A regarding Modvat credit.
3. Retrospective application of the amendment dated 16-3-1995.
4. Applicability of previous tribunal judgments on Modvat credit eligibility.

Detailed Analysis:

Issue 1: Eligibility of refractories for Modvat credit
The Commissioner disallowed Modvat credit on refractories used for lining kilns and furnaces, amounting to Rs. 10,37,606, stating they were not specified as capital goods under Rule 57Q(1). The appellants argued that the lining materials were essential for efficient functioning and should be eligible for Modvat credit under Rule 57Q. The Tribunal noted that refractories are indeed lining materials for furnaces and examined whether they qualify as inputs under Rule 57A or capital goods under Rule 57Q.

Issue 2: Interpretation of Rule 57Q and Rule 57A
The appellants contended that if refractories were not covered under Rule 57Q, they should be considered under Rule 57A as parts of the furnace. They argued that the exclusion clause under Rule 57A does not cover parts or spares, making them eligible as inputs. Citing previous tribunal decisions, they emphasized that the goods were declared as modvatable and should be allowed Modvat credit.

Issue 3: Retrospective application of the amendment
The department argued against the retrospective application of the amendment dated 16-3-1995, stating that Modvat credit on refractories should only be eligible from that date onwards. However, the appellants relied on tribunal judgments suggesting that the amendment was clarificatory in nature and applicable retrospectively.

Issue 4: Applicability of previous tribunal judgments
The appellants cited various tribunal decisions supporting their claim for Modvat credit on refractories, emphasizing that the products were modvatable regardless of the specific rule under which they fell. The Tribunal examined these judgments and concluded that refractories were eligible for Modvat credit even before 16-3-1995, as they were not covered by the exclusion clause under Rule 57A and were considered inputs.

In conclusion, the Tribunal allowed the appeal, holding that Modvat credit on refractories used for lining furnaces was admissible even before 16-3-1995. The decision was based on the interpretation of Rule 57A and Rule 57Q, as well as the retrospective application of the relevant amendment, supported by previous tribunal judgments.