1998 (12) TMI 237 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on storage tanks and dip rods.
2. Interpretation of Rule 57Q regarding capital goods.
3. Integration of storage tanks with the manufacturing process.

Issue 1: Denial of Modvat credit on storage tanks and dip rods:

The learned Consultant challenged the order-in-appeal that denied Modvat credit on storage tanks and dip rods used for storing raw materials, arguing that they are integral to the manufacturing process. Citing the decision in a previous case, it was emphasized that any step towards production is a process in relation to manufacture. The Consultant contended that even storage of raw materials within the factory premises qualifies as part of the manufacturing process, as the end product cannot be manufactured without raw materials. Referring to other cases, it was argued that equipment like stainless steel tanks used during the manufacturing process are eligible as capital goods under Rule 57Q.

Issue 2: Interpretation of Rule 57Q regarding capital goods:

The Consultant highlighted the definition of "capital goods" as per previous decisions, emphasizing that components and parts of the plant used in the manufacturing process qualify for Modvat credit under Rule 57Q. Referring to the wider interpretation of the term "plant" and the explanation under Rule 57Q, it was argued that storage tanks and other related equipment should be considered as capital goods due to their role in the manufacturing process.

Issue 3: Integration of storage tanks with the manufacturing process:

The learned SDR reiterated the order-in-appeal, arguing that the storage tanks were not integrally connected to the manufacturing process and machinery, thus not qualifying as capital goods under Rule 57Q. However, upon review, it was found that the storage tanks were indeed connected to the manufacturing process by feeding raw materials for the manufacture of paints. Drawing parallels with previous judgments that considered handling of raw materials as integral to the manufacturing process, the Tribunal concluded that storage tanks are parts of the plant and therefore eligible for Modvat credit under Rule 57Q.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief as per the law. The judgment emphasized the wider interpretation of the manufacturing process and the eligibility of storage tanks as capital goods under Rule 57Q, based on their integral role in the production process.