1998 (3) TMI 330 - AT - Central Excise

Summary

Issues:
1. Whether the Wagon Loader and Diamond Grinding Wheels can be considered as capital goods for the purpose of Modvat credit.
2. Whether the definition of capital goods under Rule 57Q includes items used for post-manufacturing activities.
3. Whether the Notification No. 14/96, dated 23-7-1996, which replaced the definition of capital goods, has retrospective effect.

Analysis:

Issue 1: Wagon Loader and Diamond Grinding Wheels as Capital Goods
The Commissioner held that the Wagon Loader and Diamond Grinding Wheels do not qualify as capital goods under Rule 57Q, denying Modvat credit. The appellant argued that the Notification No. 14/96, dated 23-7-1996, replaced the definition of capital goods, extending the scope to all goods used in the factory. The Tribunal found merit in the appellant's submission, holding that both items fall within Chapter Heading 84.28 and 68.01, making them eligible for Modvat credit.

Issue 2: Definition of Capital Goods and Post-Manufacturing Activities
The Commissioner based the denial of Modvat credit on the premise that the Wagon Loader is used for post-manufacturing activities and not for producing or processing goods. The appellant contended that the new definition under Notification No. 14/96 expanded the scope to goods used within the factory premises. The Tribunal agreed, emphasizing that the restricted meaning of capital goods under the old definition cannot apply after the issuance of the new notification.

Issue 3: Retrospective Effect of Notification No. 14/96
The appellant argued that the notification has retrospective effect, replacing the old definition of capital goods. The Tribunal noted that previous rulings did not specifically address the retrospective nature of the notification. However, it held that the new definition extended the term capital goods to include goods used within the factory, necessitating the grant of Modvat credit to the Wagon Loader and Diamond Grinding Wheels.

In conclusion, the Tribunal set aside the impugned order, granting Modvat credit to the Wagon Loader and Diamond Grinding Wheels. The denial of credit was deemed unjustified, considering the expanded definition of capital goods under the new notification. The appeal was allowed in favor of the appellant, with consequential relief granted.