1999 (12) TMI 258 - AT - Central Excise

Summary

Issues:
Department's Appeal against Order allowing Modvat credit on Spectrophotometer and Teflon Spacer under Rule 57-Q.

Analysis:
The Department contended that Spectrophotometer and Teflon Spacer did not bring about any change in the raw material or processing but were limited to testing parameters. The Department argued that these items were not used in the manufacturing process as required by Rule 57Q before the amendment on 16-3-1995. They referred to various decisions emphasizing the restricted definition of capital goods and the necessity for items to bring about a change in the substance for final product manufacture. The Department highlighted the distinction between 'process' and 'processing' in Excise Law and cited the 1995 Budget Speech to show the historical context of Modvat credit for specific equipment.

The Respondents, on the other hand, relied on previous Tribunal decisions to support their stance. They referred to cases where spectrophotometer and densitometer were considered eligible for Modvat credit as capital goods due to their essential role in the manufacturing process. They cited decisions like C.C.E. v. Hydro S & S Industries and AVI Photochem Ltd. v. CCE, Pune to argue that instruments used for testing and measuring, if integral to the manufacturing process, should be deemed as capital goods under Rule 57Q.

Upon considering the arguments and case law presented, the Tribunal upheld the Commissioner (Appeals)'s decision to allow Modvat credit on the Spectrophotometer and Teflon Spacer. The Tribunal emphasized that items essential for testing and measuring in the manufacturing process could be considered as capital goods under Rule 57Q. The Tribunal specifically referenced the decision in C.C.E. v. Hydro S & S Industries, where Modvat credit on the spectrophotometer was allowed, as a precedent supporting the eligibility of such items. Consequently, the Revenue Appeal against the Commissioner (Appeals)'s order was rejected, affirming the decision to grant Modvat credit on the disputed items.