1999 (10) TMI 336 - AT - Central Excise

Summary

Issues:
Claim for Modvat credit on goods used for dehumidification in manufacturing process.

Analysis:
The appeal was filed against an order confirming the disallowance of Modvat credit on goods used for dehumidification in the manufacturing process. The appellants, manufacturers of self-adhesive tape and BOPP film, sought Modvat credit on CEL Deck cooling pads used for supplying conditioned air to the manufacturing unit. The Assistant Commissioner disallowed the credit, stating the goods did not directly contribute to the manufacturing process. The Commissioner (Appeals) upheld this decision. The appellants approached the Tribunal, but no one appeared for the hearing, only seeking a decision on merits.

The Tribunal analyzed the definition of 'capital goods' under Rule 57Q of the Central Excise Rules, emphasizing the requirement for goods to be used in production, processing, or bringing about a change in the substance for manufacturing the final product. Referring to precedent, the Tribunal highlighted that 'capital goods' must have a direct nexus with the manufacturing process, physically participating in bringing about a change in the substance of the goods. The Tribunal cited a case where a humidification plant was not considered eligible for Modvat credit as it did not directly contribute to the manufacturing process.

The appellants cited various cases in support of their claim for Modvat credit, but the Tribunal found these cases inapplicable to the current situation. The Tribunal clarified that the goods in question, used for dehumidification, did not have a direct nexus with the production of the final product, as they were not involved in bringing about any change in the substance used in manufacturing. The Tribunal dismissed the appeal, affirming that the impugned order was legally valid, and there was no merit in the appellants' claim for Modvat credit on the goods used for dehumidification in the manufacturing process.