1998 (3) TMI 375 - AT - Central Excise

Summary

Issues:
1. Eligibility of Diesel Oil Engine for Modvat credit as capital goods under Rule 57Q.
2. Interpretation of Rule 57Q and Rule 57S in relation to capital goods.
3. Conflict between substantive law and procedural law in determining eligibility for Modvat credit.

Analysis:
1. The case involves a Reference Application from Revenue challenging a Tribunal's order that held a Diesel Oil Engine used in a plant manufacturing Acetic Anhydride as eligible for Modvat credit as capital goods under Rule 57Q. The Assistant Collector initially disallowed the credit, but the Commissioner (Appeals) allowed it, stating that the engine was necessary for the plant's operation. The Tribunal remanded the matter for reconsideration, citing other decisions on similar issues.

2. The Tribunal considered whether the Diesel Oil Engine, which was used to power a generator set producing electricity for the manufacturing process, qualified as a capital good under Rule 57Q. The Tribunal referred to previous cases where the distinction between Rule 57Q (substantive law) and Rule 57S (procedural law) was highlighted. The Tribunal emphasized that the substantive rule should prevail over procedural rules in determining the eligibility for Modvat credit.

3. The crux of the issue revolved around the conflicting interpretations of Rule 57Q and Rule 57S. The Tribunal departed from its previous stance by considering Rule 57S in conjunction with Rule 57Q, leading to a question of law regarding the extension of capital goods credit based on procedural provisions. The Tribunal acknowledged the conflicting decisions and referred the question of law to the High Court for clarification on whether the Tribunal's order correctly extended the scope of capital goods credit by relying on Rule 57S alongside Rule 57Q.