2000 (6) TMI 221 - AT - Central Excise

Summary

Issues involved:
1. Eligibility of transformers for modvat credit under Rule 57Q of the Central Excise Rules as 'capital goods' prior to 16-3-1995.

Detailed Analysis:

Issue 1: Eligibility of transformers for modvat credit under Rule 57Q prior to 16-3-1995:
The Collector of Central Excise contended that transformers were not eligible for modvat credit under Rule 57Q before 16-3-1995 as they were not used for producing, processing, or bringing about any change in any substance for the manufacture of the final product. It was argued that the amendment including transformers as eligible 'capital goods' did not have retrospective effect. Reference was made to a clarification by the Central Board of Excise & Customs stating that modvat credit on transformers was not admissible before 16-3-1995. Previous tribunal decisions emphasizing adherence to rules and definitions of capital goods were cited to support the argument against eligibility of transformers for credit.

In opposition, it was argued that prior to 16-3-1995, capital goods encompassed machines, machinery, plant equipment, apparatus, tools, or appliances, making all such items eligible for modvat credit under Rule 57Q. The counsel relied on tribunal decisions and a Larger Bench ruling that supported the eligibility of electrical items like wires, cables, control panels, exhaust fans, and EOT cranes for modvat credit under similar rules.

The Tribunal noted the longstanding contentious nature of the issue with conflicting decisions by various authorities. A recent referral of a similar issue to the Hon'ble Rajasthan High Court indicated the complexity and importance of the matter. Considering the existing uncertainty and the previous referral, the Tribunal allowed the reference application and referred the issue of whether modvat credit on transformers could be allowed under Rule 57Q before 16-3-1995 to the Hon'ble Rajasthan High Court for clarification.

This detailed analysis highlights the arguments presented by both parties regarding the eligibility of transformers for modvat credit under Rule 57Q before 16-3-1995, the relevant legal provisions and precedents cited, and the Tribunal's decision to refer the issue to the High Court for resolution due to the contentious nature of the matter and conflicting interpretations by different authorities.