1998 (11) TMI 184 - AT - Central Excise

Summary

Issues:
Eligibility of Modvat Credit under Capital goods scheme for Diesel Generating sets and Comber for cotton yarn.

Analysis:

1. Diesel Generating Set Issue:
The judgment discusses the eligibility of Modvat Credit for a Diesel Generating set used in the manufacture of yarns. The Assistant Collector Central Excise had allowed the credit for the Diesel Generating set as it was used to generate electricity for spinning yarns. However, the order under appeal did not address this issue, focusing solely on the Comber for cotton yarn. The Tribunal found that the question of the Diesel Generating set was a non-issue in this appeal, as there were no grounds raised against it. Therefore, no further orders were required regarding the Diesel Generating set.

2. Comber for Cotton Yarn Issue:
The main issue revolved around the eligibility of Modvat Credit for a Comber used in the production of cotton carded/combed, which is an intermediate product chargeable to NIL duty. The Revenue argued against allowing credit on the Comber before 21-10-1994, citing that Rule 57S does not extend credit and that the Notification No. 60/94-C.E. only allowed credit for preparatory stage machines like the Comber from 21-10-1994. The Appellate Tribunal referred to previous cases and held that carded/combed cotton is considered 'goods' falling under a specific chapter heading, making the machinery used for its production ineligible for Modvat credit up to 27-10-1994. The Tribunal also clarified that Notification No. 60/94 was not retrospective and, therefore, credit could not be applied before the specified date. Consequently, the impugned orders allowing credit on the Comber were set aside, and the appeals of the Revenue succeeded based on the precedent set in a previous case with similar circumstances.

3. Application of Precedents:
The Tribunal relied on previous decisions, such as C.C.E. v. Singaravelar Spinning Mills (P) Ltd., to determine the eligibility of Modvat Credit for the Comber. The findings in the earlier case, which addressed similar issues regarding carded/combed cotton and the application of specific notifications, were deemed applicable to the present case due to the identical nature of the disputes. By applying the ratio of the previous judgment to the current scenario where the machines were received before the specified date, the Tribunal concluded that the impugned orders were to be set aside, and the appeals of the Revenue were upheld.

In conclusion, the judgment clarified the eligibility criteria for Modvat Credit under the Capital goods scheme for both a Diesel Generating set and a Comber used in the manufacturing process. The decision emphasized the importance of adhering to specific rules and notifications governing such credits and relied on established precedents to reach a final verdict in favor of the Revenue based on the non-retrospective nature of the relevant notifications.