1997 (7) TMI 411 - AT - Central Excise

Summary

Issues:
Benefit of Modvat credit in respect of machines used in the manufacture of cotton yarn under Tariff Heading 52.02 received before the relevant notification.

Detailed Analysis:

1. The appeal before the Appellate Tribunal CEGAT, Madras concerned the eligibility of Modvat credit for machines used in manufacturing cotton yarn under Tariff Heading 52.02 received before a specific notification. The lower authority had allowed the Modvat credit to be available from a certain date after the notification.

2. The JDR for the appellant argued that since the Modvat credit was not available at the time of receiving the machines, they should not be considered eligible for Modvat credit even after the notification. The JDR contended that the goods were marketable, and eligibility for Modvat credit should be determined at the time of receiving the goods in the factory.

3. The representative for the appellant argued that the goods were not marketable in their current state and that the manufacturing process required further stages before the final product, cotton yarn, could be produced. The representative asserted that the machines should be considered in relation to the cotton yarn production process and be eligible for Modvat credit.

4. The Tribunal observed that the lower authority had deemed the goods marketable, a finding that was not challenged by the appellant. The key issue was whether the machines used for manufacturing the goods could be considered eligible capital goods for Modvat credit since the Tariff Heading was not notified at the time of receiving the machines.

5. The Tribunal held that eligibility for Modvat credit under Rule 57Q should be determined at the time of receiving the goods. If Modvat credit was not available at that time, the machines could not be considered for the credit, even if they later fell under the definition of capital goods due to a rule amendment.

6. Consequently, the Tribunal concluded that the lower authority erred in allowing the Modvat credit and ruled in favor of the revenue appeal, stating that the Modvat credit should not have been granted in this case.

This detailed analysis outlines the arguments presented by both parties regarding the Modvat credit eligibility for machines used in manufacturing cotton yarn and the Tribunal's decision based on the relevant legal provisions and factual circumstances.