1999 (10) TMI 406 - AT - Central Excise

Summary

Issues:
1. Eligibility for Modvat credit on graphite blocks under Rule 57Q of the Central Excise Rules, 1944.
2. Eligibility for Modvat credit on synthetic filter fabrics under Rule 57Q of the Central Excise Rules, 1944.

Analysis:

Issue 1: Eligibility for Modvat credit on graphite blocks
The appeal involved a dispute regarding the denial of Modvat credit on graphite blocks by the Commissioner (Appeals). The Commissioner held that graphite blocks were used for making boats inside the furnace and, therefore, not eligible for credit under Rule 57Q. However, the appellants contended that the denial was based on a mistaken reference to 'carbide' blocks instead of 'graphite' blocks. The judge found that graphite blocks, even before being transformed into boats, were integral inputs for manufacturing boats, which were considered accessories in the process. As graphite blocks were part of the integral process of manufacturing the final product, they were deemed eligible for Modvat credit as capital goods. The judge agreed with the appellants' submission, overturning the Commissioner's decision and allowing the appeal.

Issue 2: Eligibility for Modvat credit on synthetic filter fabrics
The second item in dispute was synthetic filter fabrics, for which Modvat credit was also denied by the Commissioner (Appeals). The Commissioner stated that synthetic filter fabrics were used for filtration of processed material and, therefore, not eligible for capital goods credit. However, the appellants argued that synthetic filter fabrics were part of filter equipment used in the manufacture of tungsten oxide, an intermediate product for their finished products. The judge noted that the Commissioner's finding on the usage of synthetic filter fabrics for manufacturing tungsten oxide was inconsistent with the denial of capital goods credit. It was concluded that the Commissioner's statement denying credit was likely a typing error, as synthetic filter fabrics were indeed essential for the manufacturing process. Consequently, the judge accepted the appellants' submission, allowing Modvat credit for synthetic filter fabrics under Rule 57Q. The appeal was allowed, setting aside the impugned order and granting consequential benefits to the appellants in accordance with the law.