1999 (10) TMI 304 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit on specific goods under Rule 57Q of the Central Excise Rules, 1944.
2. Eligibility of capacitors for Modvat credit as capital goods under Rule 57Q.
3. Classification of electrical items as capital goods under Rule 57Q for Modvat credit.

Analysis:
1. The case involved the disallowance of Modvat credit amounting to Rs. 19,933/- on specific goods by the Assistant Commissioner of Central Excise, leading to appeals filed by both the Revenue and the assessee against the Commissioner (Appeals) order. The lower appellate authority allowed Modvat credit on capacitors but denied it on other goods, prompting the appeals before the Appellate Tribunal CEGAT, New Delhi.

2. Regarding the eligibility of capacitors for Modvat credit under Rule 57Q, the Revenue argued that capacitors do not qualify as capital goods as they are only used to step up electric power and lack a nexus with the production process. Citing the decision in the case of Commissioner of Central Excise v. Shanmungraja Spinning Mills, the Revenue contended against allowing Modvat credit on capacitors. However, the assessee's advocate relied on several Tribunal decisions, including Grasim Cement v. C.C.E., Century Cements Limited v. C.C.E., and India Glycols Limited v. C.C.E., Meerut, where capacitors were deemed eligible for Modvat credit. The Appellate Tribunal, after considering the submissions and the Larger Bench decision in Jawahar Mills v. C.C.E., Coimbatore, concluded that capacitors qualify as capital goods under Rule 57Q for Modvat credit, thereby dismissing the Revenue's appeal.

3. In the assessee's appeal, the advocate argued that all the goods in question, including electrical items, should be considered capital goods eligible for Modvat credit under Rule 57Q. Citing the decision in Jawahar Mills, the advocate contended that electrical items fall under the category of capital goods. The Appellate Tribunal agreed with this argument, finding that the disputed goods, being electrical items, align with Explanation I to Rule 57Q and are eligible for Modvat credit as capital goods. Consequently, the Appellate Tribunal allowed the assessee's appeal, granting consequential relief.

This detailed analysis of the judgment highlights the issues, arguments presented by both parties, relevant legal precedents, and the Appellate Tribunal's reasoning leading to the dismissal of the Revenue's appeal and the allowance of the assessee's appeal.