1997 (11) TMI 271 - AT - Central Excise

Summary

Issues: Denial of Modvat credit on electric wires and cables as capital goods.

In this judgment by the Appellate Tribunal CEGAT, New Delhi, the dispute revolved around the denial of Modvat credit on electric wires and cables used for supplying electricity in the manufacturing process of aluminum. The department argued that electric wires and cables did not qualify as capital goods under the Explanation to Rule 57Q. The appellant contended, supported by previous Tribunal orders, that electric wires and cables should be considered capital goods for Modvat credit, citing relevant cases such as Collector of Central Excise v. Nova Udyog Ltd and others.

The learned DR argued that capital goods only encompass main machinery directly involved in manufacturing, excluding items like wires and cables used for electricity supply, which are considered fixtures and not directly involved in production. Referring to a previous case involving air conditioners and de-humidifiers, the DR emphasized that only machinery directly used in production qualifies for Modvat credit, not ancillary items like wires and cables.

Upon careful consideration, the Tribunal rejected the argument that only main machinery directly involved in production qualifies for Modvat credit. Citing the case of Ashoka Industries v. Collector of Central Excise, the Tribunal held that essential components, spare parts, and accessories necessary for machinery operation are also considered capital goods. In this case, electric wires and cables crucial for the functioning of manufacturing machinery were deemed capital goods eligible for Modvat credit. Following the precedent set by previous decisions, the Tribunal ruled in favor of the appellant, allowing Modvat credit on electric wires and cables used for electricity supply in the aluminum manufacturing plant, setting aside the impugned order and granting consequential relief to the appellants in accordance with the law.