1998 (9) TMI 228 - AT - Central Excise

Summary

Issues:
1. Eligibility of Evaporator Boats for Modvat credit under Rule 57A.
2. Classification of Evaporator Boats as tools and equipment.
3. Applicability of previous Tribunal decisions on the case.

Analysis:

Issue 1: Eligibility for Modvat credit under Rule 57A
The appellant argued that the Tribunal's Final Order had held that Evaporator Boats were not eligible for Modvat credit under Rule 57A. This decision was based on the precedent set in M.P. Polypropylene Ltd. v. C.C.E., where it was determined that evaporator boats were akin to tools and equipment, thus ineligible for Modvat credit as inputs. However, the appellant contended that this decision did not align with earlier Tribunal rulings in cases such as CCE v. Durgapur Cement Works and Union Carbide India Ltd. The Tribunal had also previously ruled differently in the case of Raxor India Ltd., where evaporation boats were deemed eligible for Modvat credit, rejecting the argument that they were parts of machinery. Due to conflicting decisions, the appellant sought a reference to the Hon'ble High Court under Section 35G of the Central Excise Act, 1944, to address the legal question at hand.

Issue 2: Classification as Tools and Equipment
The Departmental Representative acknowledged the conflicting Tribunal decisions regarding the eligibility of evaporator boats for Modvat credit under Rule 57A and whether they should be classified as tools and equipment. The Reference Application raised the question of whether evaporator boats used in metallising/lacquering polyester film could be considered as tools and equipment, thus excluding them from Modvat credit under Rule 57A. The Department argued that the functional characteristics of evaporator boats, as shown under Chapter sub-heading 8545 for machinery and equipment, warranted their exclusion from the definition of input under Rule 57A. Previous cases like J.K. Cotton and Spinning Mills Ltd. v. C.C.E. and Durgapur Cement Works supported the view that evaporator boats fell within the scope of being "used in the manufacture of goods."

Issue 3: Applicability of Previous Tribunal Decisions
The Tribunal recognized the existence of conflicting decisions among its various benches regarding the eligibility of evaporator boats for Modvat credit under Rule 57A and their classification as tools and equipment. Considering the legal question raised by the appellant, the Tribunal agreed to refer the matter to the Hon'ble Allahabad High Court based on the three formulated questions of law. This decision aimed to address the inconsistency in Tribunal rulings and seek clarity on the interpretation and application of relevant legal provisions in the case at hand.

In conclusion, the judgment highlighted the complexity arising from conflicting Tribunal decisions on the eligibility of evaporator boats for Modvat credit under Rule 57A and their classification as tools and equipment. The reference to the High Court sought to resolve these legal uncertainties and provide clarity on the interpretation of relevant legal provisions in the context of the case.