1997 (8) TMI 243 - AT - Central Excise

Summary

Issues involved: Availability of Modvat credit in respect of capital goods under Rule 57Q of the Central Excise Rules.

Summary:
1. The appeals involved a common issue regarding the availability of Modvat credit for capital goods, specifically a Carding Unit and spares, under Rule 57Q. The machines were used for manufacturing cotton carded/combed, claimed to be an intermediate product for yarn manufacture, a notified product under Rule 57Q. The lower appellate authority ruled that Modvat credit for the machinery was not available before 21-10-1994 due to the non-notified status of goods under Heading 52.02. The authority also confirmed that cotton carded/combed was a marketable commodity. Since no appeal was filed against this finding, it became final, leading to the main issue of whether cotton carded/combed was marketable in these cases.

2. The appellant argued that Modvat credit could only be available for the machines if the intermediate product (cotton carded/combed) was specified under Rule 57Q. As cotton carded/combed was not specified under Tariff 5202.00 at the relevant time, the appellant contended that Modvat credit should not have been allowed. The appellant also highlighted Rule 57S for splitting Modvat credit between original purchasers and subsequent buyers, stating that taking Modvat credit for ineligible goods from a later date was not permitted under the rules.

3. The consultant for the respondent supported the reasoning of the lower appellate authority.

4. After considering both arguments, the Tribunal concluded that since the goods were marketable and excluded from Rule 57Q at the time of purchase, Modvat credit for the machines could not have been allowed. As no specified item emerged when the machines were received, Modvat credit was not available then or later when the goods were included under Rule 57Q. The availability of Modvat credit had to be determined at the time of receipt in the factory, and since it was not available then, it could not be claimed later. Therefore, based on the final finding that cotton carded/combed was marketable, the appeal of the Revenue was allowed.