1999 (11) TMI 260 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit for Carton Sealing Machines under Rule 57Q.
2. Interpretation of the definition of capital goods under Rule 57Q.
3. Whether Carton Sealing Machines qualify as capital goods for the purpose of Modvat credit.

Analysis:
1. The appeal was filed against the denial of Modvat credit for Carton Sealing Machines by the Commissioner (Appeals). The Asst. Commissioner had allowed the credit, stating that packing is an essential process for making finished goods marketable. However, the Commissioner (Appeals) upheld the Department's view that these machines did not bring about any change in the substance of the final product and were not used for producing or processing finished goods.

2. The Asst. Commissioner referred to the amendment specifying Carton Sealing Machines as capital goods. The appellant argued that packing is part of the manufacturing process, citing previous Tribunal decisions. The definition of capital goods under Rule 57Q includes machinery used for producing or processing goods or bringing about a change in substance for final products. The appellant contended that the Carton Sealing Machines were integral to the manufacturing process.

3. The Tribunal examined whether the Carton Sealing Machines were used for manufacturing shoes or merely for packing. The Tribunal found that the machines were solely used for packing the final products and not for manufacturing. The Tribunal clarified that the definition of capital goods required machinery to be used in the manufacture of final products. Packing was considered a separate activity post-manufacturing and not incidental to the manufacturing process, leading to the dismissal of the appeal.

In conclusion, the Tribunal dismissed the appeal, emphasizing that the Carton Sealing Machines were used for packing final products and not for manufacturing them, thus not meeting the criteria for capital goods under Rule 57Q. The decision highlighted the distinction between essential packing processes and machinery directly involved in the manufacturing process, ultimately denying the Modvat credit for the machines in question.