1999 (6) TMI 121 - AT - Central Excise

Summary

Issues: Disallowance of credit on items used in the manufacture of sugar prior to 16-3-1995 under Rule 57Q of the Central Excise Rules, 1944.

Analysis:
1. Disallowed Credit on Items: The issue in this case revolves around the disallowance of credit on various items used in the manufacture of sugar prior to 16-3-1995. The contention was that these items were not covered under the definition of Capital goods under Rule 57Q of the Central Excise Rules, 1944, during the relevant period. The items in question included DC Diode panel, Cable, Push Button panel, Motor Starting panel, Forced lab unit, Gear Reducer, Speed Reducer, 4000 KVA Transformer, Fabrication of SH coil, Pr. Transmitter, and Compressor.

2. Appellant's Argument: The advocate for the appellant argued that all the items disallowed were essential for the manufacturing process of the final product and should be considered as capital goods. It was emphasized that these items were in the nature of plant/machinery used in the production or processing of goods. The advocate relied on a previous decision of the Larger Bench of the Tribunal to support the claim that these items were entitled to credit as capital goods even before 16-3-1995.

3. Revenue's Position: The Departmental Representative reiterated the findings of the adjudication and the Appellate order, maintaining the disallowance of credit on the items in question.

4. Judgment: The Tribunal carefully examined the use of the items in the manufacturing process. It was established that the items such as different types of panels, gear reducer, speed reducer, forced lubricating unit, transformer, pressure transmitter, compressor, and fabrication of S.H. coils were integral to the manufacturing process of sugar. The Tribunal referred to a previous case where it was held that items recognized as eligible for capital goods credit by specific notifications were already covered by the Explanation to Rule 57Q. The Tribunal emphasized that the definition of capital goods did not necessitate a direct nexus with the final product but included items necessary for the business with a high degree of durability. Following the precedent set by the Larger Bench decision, the Tribunal ruled in favor of the appellant, allowing the Modvat credit and overturning the impugned order.

5. Conclusion: The judgment concluded that the items disallowed for credit were indeed capital goods essential for the manufacturing process, as per the definition under Rule 57Q. The decision was based on the interpretation that items necessary for business operations with durability fell under the category of capital goods, irrespective of specific notifications.