1998 (3) TMI 311 - AT - Central Excise

Summary

Issues:
1. Entitlement to Modvat credit on capital goods used for assembling Mobile Delivery Pump Truck (MDPT) for manufacturing Bulk Explosives.

Analysis:
The case revolved around the question of whether the appellants were eligible for Modvat credit on duty paid capital goods used in assembling MDPT for producing Bulk Explosives. The Assistant Commissioner initially denied the credit, stating that the goods did not fall under the definition of "capital goods" as per Rule 57Q of the Central Excise Rules. The lower appellate authority also ruled against the appellants, asserting that MDPT could not be classified as a mobile factory, and the goods for which Modvat credit was sought did not qualify as capital goods under Rule 57Q.

The appellants argued that the MDPT functioned as a mobile factory, assembling Bulk Explosives on-site. They contended that goods used for setting up a factory for manufacturing dutiable final products were eligible for Modvat credit under Rule 57Q. To support their claim, the appellants provided a detailed write-up on the MDPT's functioning and a catalogue outlining its various components and operations.

The Judicial Member acknowledged the appellants' argument regarding the MDPT being a mobile factory for Bulk Explosives production. However, the Member differentiated between the conveyance part of the MDPT, which did not qualify for Modvat credit, and the other machinery components like Hydraulic Power Pack, Manufacturing and Delivery Equipment, and Instrumentation for operation and safety, which could potentially be considered capital goods eligible for Modvat credit.

Upon examining the relevant rules, particularly Rule 57Q concerning Modvat credit on capital goods, the Judicial Member highlighted that the Central Excise Act did not recognize the concept of a "mobile factory." As per the Act, a factory was defined as premises where excisable goods were manufactured, excluding movable structures. Therefore, the Member concluded that Modvat credit would not apply to goods associated with a mobile factory under the Central Excise Act.

Additionally, the Member pointed out another aspect that neither party had explored. The MDPT had not paid duty liability under Tariff Heading 87.05 on its full value, despite being an excisable commodity. If the MDPT was considered a marketable and excisable good, duty liability would arise on it, potentially allowing Modvat credit on the duty-paid parts used in its assembly under Rule 57A.

Ultimately, the Judicial Member dismissed the appeal, emphasizing that the concept of a mobile factory was incompatible with the Central Excise Act, rendering the appellants ineligible for Modvat credit on the goods in question. However, both parties were encouraged to consider the duty liability aspect on the MDPT under Tariff Heading 87.05 for further examination.