1999 (6) TMI 258 - Commissioner - Central Excise

Summary

Issues:
1. Eligibility of Modvat credit on Electric Motors, Diesel generating Set, UPS System, Boost charges, Capacitor, and Batteries under Rule 57Q of Central Excise Rules, 1944.

Analysis:
The case involved a dispute regarding the eligibility of Modvat credit on various items under Rule 57Q of Central Excise Rules, 1944. The appellants, M/s. Global Boards Ltd., Mahad, had availed of credit on Electric Motors, Diesel generating Set, UPS System, Boost charges, Capacitor, and Batteries. The adjudicating authority denied the credit, stating that these items were not used for producing or processing goods or bringing about any change in the manufacturing process of the final product, hence not qualifying as 'Capital Goods' under Rule 57Q.

During the personal hearing, the appellant's representative reiterated their submissions. The Commissioner analyzed the eligibility of each item individually. Regarding the UPS System and its components, it was argued that the UPS System is essential in a factory to prevent material wastage during power failures. Citing a Tribunal case, it was established that if the UPS is integrated with the main equipment in the manufacturing process, Modvat credit is admissible, making the components eligible as well.

Regarding Capacitors, it was argued that they are essential for improving power factor and system protection. The Commissioner relied on previous decisions where credit was allowed on capacitors for voltage flow to machines or equipment. The Commissioner emphasized that all the items in question were spare parts of machinery essential for production, citing Tribunal cases supporting the eligibility of components and accessories aiding the manufacturing process.

The Commissioner noted that the amendment to the definition of capital goods was clarificatory and retrospective in nature. Citing various judgments and Supreme Court cases, it was established that the amendment's purpose and context, as explained by the Finance Minister, were crucial for correct interpretation. The adjudicating authority had allowed credit on Electric Motors and Diesel generating Sets but disallowed it on UPS System, Boost charges, Batteries, and Capacitors.

In conclusion, the Commissioner set aside the lower authority's decision and allowed the credit on the UPS System and its components, namely boost charges, batteries, and capacitors. The appeal was allowed accordingly.