1998 (11) TMI 258 - AT - Central Excise

Summary

Issues:
- Dispensation with the pre-deposit of duty amount of Rs. 5,66,330 denied as Modvat credit on Cylinders and vacuum pumps used for filling Oxygen Gas.
- Interpretation of Rule 57Q of Central Excise Act, 1944 regarding the eligibility of cylinders and vacuum pumps as capital goods for Modvat credit.

Analysis:
1. The applicants sought dispensation with the pre-deposit of duty amount denied as Modvat credit on cylinders and vacuum pumps used for filling Oxygen Gas. The advocate argued that the cylinders and vacuum pumps qualified as capital goods under Rule 57Q as they were used for storing, removing, and carrying compressed Gas, which was in relation to the manufacture of the final product, compressed Gas. The advocate cited precedents where similar equipment was considered eligible for Modvat credit, emphasizing that the cylinders were used in relation to the manufacture of Oxygen in cylinders, falling under a specific heading.

2. The respondent opposed the arguments, stating that the cylinders and vacuum pumps did not qualify as capital goods under the amended Rule 57Q, which defined capital goods based on specific sub-headings of the Central Excise Tariff Act, 1985. The respondent cited a Tribunal decision holding the amendment to Rule 57Q as retrospective, affecting the eligibility of Modvat credit. The respondent argued that since the cylinders and vacuum pumps fell under sub-headings not covered by the amended rule, the stay petition should be rejected.

3. The tribunal considered both arguments and found the issue to be arguable from both sides. Noting that the applicants did not claim financial hardship, the tribunal directed the applicants to deposit Rs. 2.5 lakhs within eight weeks. Upon this deposit, the balance amount of duty would be waived, and recovery stayed during the appeal's pendency. The tribunal warned that failure to deposit would result in the dismissal of the appeal without further notice, setting a compliance date for the matter.