1998 (2) TMI 391 - AT - Central Excise

Issues:
1. Disallowance of credit for capital goods used in the manufacture of exempted goods.
2. Eligibility of preparatory machines and their spares for credit.
3. Interpretation of Rule 57S and Rule 57Q in relation to capital goods.
4. Effect of Notification No. 23/94-C.E. (N.T.) on the definition of capital goods.
5. Applicability of Rule 57S to redefine capital goods.
6. Retroactive effect of Notification No. 60/94-C.E. (N.T.) on credit eligibility.
7. Classification of AVR Control card lensing Transformer supply transformer as capital goods.
8. Eligibility of parts/accessories of generating sets for credit.
9. Use of Carbon tetra chloride and its classification as capital goods.

Analysis:
1. The appeal challenged the disallowance of credit for capital goods used in the manufacture of exempted goods. The Collector (Appeals) set aside the Assistant Commissioner's order and directed the allowance of capital goods credit after disallowing proportionate credit at a specified rate per quarter for usage up to a certain date. The decision was based on a harmonious reading of Rule 57Q with 57S and a previous ruling by CEGAT in a similar case.

2. The department contested the eligibility of preparatory machines and their spares for credit. They argued that certain rulings relied upon by the Commissioner (Appeals) had not reached finality. The department also disagreed with the interpretation of Rule 57S and Rule 57Q in granting proportionate credit for preparatory machines and their spares received before a specific date.

3. The interpretation of Rule 57S and Rule 57Q was a crucial issue in determining the eligibility of certain items for credit. The department argued that Rule 57S did not redefine capital goods and that the term 'capital goods' was explained under Rule 57Q, not Rule 57S. They referenced a previous ruling by CEGAT to support their position.

4. The effect of Notification No. 23/94-C.E. (N.T.) on the definition of capital goods was debated. The department contended that the notification did not intend to expand the concept of capital goods to include goods used in the manufacture of final products. They emphasized that Rule 57S dealt with credit utilization under Rule 57Q but did not define capital goods.

5. The department argued against the retroactive effect of Notification No. 60/94-C.E. (N.T.) on credit eligibility. They claimed that there were no provisions for allowing proportionate credit retrospectively and sought to set aside the Commissioner (Appeals) order on this matter.

6. The classification of AVR Control card lensing Transformer supply transformer as capital goods was disputed. The department contended that these items were not used for producing or processing goods for the manufacture of final products, thus not meeting the definition of capital goods under Rule 57Q.

7. The eligibility of parts/accessories of generating sets for credit was challenged by the department. They argued that such items were not considered capital goods under Rule 57Q during the relevant period, making them ineligible for credit.

8. The use of Carbon tetra chloride and its classification as capital goods was another point of contention. The department argued that this substance was not used in the manufacturing process of final products and did not fall under the categories defining capital goods under Rule 57Q. They sought to set aside the Commissioner (Appeals) order in this regard.

9. In conclusion, the Tribunal remanded the matter to the CCE (A) for a decision in accordance with the law and previous rulings. The appeal was allowed by remand, emphasizing the need to consider various tribunal decisions and rules while deciding the issue.

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