1999 (9) TMI 360 - AT - Central Excise

Summary

Issues:
1. Availability of Modvat credit under Rule 57Q on Spectrophotometer for M/s. Hydro S & S Industries Ltd.
2. Availability of Modvat credit under Rule 57Q on Worm Wheel and Worm Shaft for Kothari Sugars & Chemicals Ltd.
3. Interpretation of Rule 57Q in relation to Rule 57S by the CEGAT.

Issue 1: Availability of Modvat credit under Rule 57Q on Spectrophotometer for M/s. Hydro S & S Industries Ltd.

The judgment addresses the issue of extending the scope of capital goods credit under Rule 57Q by relying on Rule 57S of the Central Excise Rules, 1944. The Tribunal considered various precedents, including the case of M.M. Forgings, to determine whether the Spectrophotometer qualifies as a capital good. The Tribunal also referred to the decision in the case of Grasim Cements where measuring and testing instruments like the Spectrophotometer were deemed eligible for Modvat credit under Rule 57Q. The Tribunal concluded that the Spectrophotometer qualifies for Modvat credit under Rule 57Q based on the detailed examination of relevant precedents and the guidelines provided by the Apex Court regarding the meaning of capital goods used in the manufacturing process.

Issue 2: Availability of Modvat credit under Rule 57Q on Worm Wheel and Worm Shaft for Kothari Sugars & Chemicals Ltd.

The judgment deliberates on whether the Worm Wheel and Worm Shaft, components of a conveyor system for carrying sugar bags, are eligible for Modvat credit under Rule 57Q. The Tribunal referenced cases such as Upper Ganges Sugar & Industries Ltd. v. C.C.E. and Century Cement to support the eligibility of similar components for Modvat credit. Additionally, the Tribunal considered decisions regarding parts of conveyor belts in other cases to establish the applicability of Modvat credit under Rule 57Q to such components. By analyzing the nexus of these components to the manufacturing process and following the guidance from the Apex Court's decision in Rajasthan Chemical Works, the Tribunal concluded that the Worm Wheel and Worm Shaft qualify as capital goods eligible for Modvat credit under Rule 57Q.

Issue 3: Interpretation of Rule 57Q in relation to Rule 57S by the CEGAT

The judgment scrutinizes the power of the CEGAT to extend the scope of Rule 57Q by relying on Rule 57S of the Central Excise Rules, 1944. The Tribunal examined the interplay between Rule 57Q and Rule 57S, considering precedents such as M.M. Forgings, to determine the validity of such an extension. By emphasizing the harmonious reading of these rules and aligning with previous Tribunal decisions, the Tribunal concluded that the issue was well-settled and did not necessitate a reference to the Hon'ble High Court. Furthermore, the judgment highlighted the detailed guidelines provided by the Apex Court in the case of Rajasthan State Chemicals Ltd., which were followed in the final order to establish the eligibility of goods as capital goods under Rule 57Q. Consequently, the Tribunal rejected the reference applications of Revenue, affirming the validity of extending the scope of Rule 57Q with reference to Rule 57S.

This comprehensive analysis of the judgment provides insights into the interpretation and application of Rule 57Q in the context of Modvat credit eligibility for specific goods, emphasizing the reliance on precedents, legal guidelines, and the harmonious reading of relevant rules to make informed decisions.