1999 (11) TMI 167 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit on wires and cables as capital goods.
2. Disallowance of Modvat credit on vacuum circuit breaker as capital goods.

Issue 1: Disallowance of Modvat credit on wires and cables as capital goods:
The appeal pertains to the disallowance of Modvat credit on wires and cables as capital goods under Rule 173Q. The Department argued that these items are not capital goods for Modvat credit purposes under Rule 57Q of the Central Excise Rules, 1944. The Department contended that the definition of capital goods was modified by Notification No. 14/96-C.E. (NT), dated 23-7-1996, making certain goods eligible for Modvat credit irrespective of their use for producing goods. The Department also argued that the meaning of capital goods under Rule 57Q is restrictive and not exhaustive, requiring a strict interpretation. The authorities below allowed Modvat credit on wires and cables as capital goods, but the Department appealed, claiming that these items only supply electricity to capital goods and do not contribute to the production process. The Department highlighted that insulated wires and cables were not specifically covered under any heading in the Explanation under Section 57Q.

Issue 2: Disallowance of Modvat credit on vacuum circuit breaker as capital goods:
The appeal concerned the disallowance of Modvat credit on a vacuum circuit breaker as a capital good under Rule 57Q. The Department argued that vacuum circuit breakers do not qualify as capital goods as they are primarily used for protecting electrical machinery and do not directly contribute to the manufacturing process. The Department contended that the Larger Bench decision in the case of Jawahar Mills supported the classification of vacuum circuit breakers as capital goods. The Department representative reiterated that not all electrical items could be considered capital goods, emphasizing the specific functional utility of vacuum circuit breakers for machinery protection. The Department appealed against the authorities' decision to allow Modvat credit on vacuum circuit breakers.

The Tribunal, after hearing both parties, held that both wires and cables, as well as vacuum circuit breakers, qualify as capital goods eligible for Modvat credit under Rule 57Q. The Tribunal noted that the decision of the Larger Bench in the case of Jawahar Mills specifically covered wires and cables as capital goods. Regarding vacuum circuit breakers, the Tribunal determined that they are essential for protecting electrical machinery used in the production process, making them capital goods as established by the Larger Bench decision. Consequently, the Tribunal upheld the authorities' decision to allow Modvat credit on both wires and cables and vacuum circuit breakers, rejecting the appeals filed by the Department.