1997 (10) TMI 205 - AT - Central Excise

Summary

Issues:
Eligibility of Deltamoist Portable Digital Moisture Meter and spares for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi concerned the eligibility of a Deltamoist Portable Digital Moisture Meter and spares for Modvat credit under Rule 57Q of the Central Excise Rules, 1944. The Department denied credit amounting to Rs. 10,144 on the basis that the item was not used for producing or processing goods or bringing about any change in any substance for the manufacture of the final product, thus not qualifying as capital goods under the Explanation to Rule 57Q(1).

Upon hearing the arguments presented by the Advocate for the Appellant and the learned DR for the Respondent, the Tribunal considered the nature of the item in question. It was established that the moisture meter served as a testing instrument crucial for testing moisture during yarn spinning to ensure high-quality yarn production. The meter controlled moisture levels during spinning operations, preventing quality control issues and waste resulting from excess or reduced moisture levels.

The Tribunal referred to precedents such as Geep Industrial Syndicate Ltd. v. CCE, Allahabad and Modi Xerox Ltd. v. CCE, Meerut, where testing instruments like electrically heated muffle furnaces and thermo-hygrographs were deemed eligible for credit under Rule 57Q. These cases emphasized the importance of testing inputs in the manufacturing process. Additionally, the Tribunal cited the judgment of the Hon'ble Gujarat High Court in Industrial Machinery Manufacturers P. Ltd. v. State of Gujarat, highlighting the significance of machinery like humidifiers in textile mills for proper manufacturing processes.

In contrast to the Respondent's argument citing Collector of Central Excise, Coimbatore v. Shanmugaraja Spinning Mills P. Ltd., the Tribunal distinguished cases where equipment like humidification plants were deemed ineligible for credit under Rule 57Q. The Tribunal held that the disputed item, the Deltamoist Portable Digital Moisture Meter, was essential for the appellants' fabric and yarn manufacturing processes, as acknowledged by the findings of the Gujarat High Court and previous Tribunal judgments. Consequently, the Tribunal ruled in favor of the Appellant, setting aside the impugned order and allowing the appeal.