1997 (11) TMI 270 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on electric wires and cables used for supply of electricity as capital goods.

Analysis:
The dispute revolves around the denial of Modvat credit on electric wires and cables used for supplying electricity in the manufacturing process of aluminum. The department argues that these wires and cables do not qualify as capital goods under the definition in the Explanation to Rule 57Q.

The appellant's representative, citing various Tribunal orders, asserts that electric wires and cables should be eligible for Modvat credit as capital goods. The representative refers to past cases such as Collector of Central Excise v. Nova Udyog Ltd, Jaypee Rewa Cement v. Collector of Central Excise, Ashoka Industries v. Collector of Central Excise, Kanoria Chemicals & Industries Ltd. v. Collector of Central Excise, and M/s. Grasim Cement. These cases support the contention that electric wires and cables are considered capital goods for Modvat credit.

On the other hand, the Departmental Representative argues that only main machinery or plant directly involved in the manufacturing process, along with spare parts and accessories, qualify as capital goods. Items like wires and cables, used for electricity supply and considered as fixtures, do not fall under this definition. The DR cites the case of Collector of Central Excise, Madras v. Fourts India Laboratories Pvt. Ltd., where air conditioners were not deemed capital goods as they were used for maintaining temperature, not directly in production. Another case, Shanmugaraja Spinning Mills Pvt. Ltd., held that de-humidifiers were not capital goods.

Upon careful consideration of the arguments, the Judge notes that previous Tribunal decisions have extended Modvat credit to electric wires and cables used for electricity supply, treating them as capital goods under Rule 57Q. The argument that only machinery directly involved in production qualifies for credit has been dismissed. In the case of Ashoka Industries v. Collector of Central Excise, it was established that components essential for machine operation are also considered capital goods. Therefore, the Judge rules in favor of the appellant, allowing Modvat credit on electric wires and cables used in the aluminum manufacturing plant, overturning the previous decision and granting consequential relief as per the law.