2000 (3) TMI 470 - AT - Central Excise

Summary

Issues: Denial of Modvat credit on steel forgings under Rule 57Q

Analysis:
1. Classification of steel forgings:
The Assistant Commissioner denied the Modvat credit on steel forgings under SH 7326.90, stating they are classified as base metal, which is excluded from availing Modvat credit as capital goods. However, the Commissioner (Appeals) observed that forged articles of iron and steel up to the stage of proof machining, requiring further machining to be used as machine parts, are classifiable under Chapter 73. The appellants failed to provide evidence of further processing beyond proof-machining to qualify as machine parts.

2. Challenge and arguments:
The appellants contested the findings, claiming they received proof machine rollers and shafts, converted into rollers for sugar mills machinery under tariff SH 8438.90. They argued that as per rule 57D(2), credit should not be denied if inputs are used in manufacturing capital goods not subject to excise duty. They asserted that steel forgings, transformed into machine components before use as capital goods, qualify for Modvat credit.

3. Legal submissions and counter-arguments:
The appellants' advocate argued that the forgings were processed into machine components, making them eligible for Modvat credit under rule 57D(2). The Revenue's representative contended that since steel forgings are not specified as capital goods, Modvat credit is inadmissible. The Revenue also highlighted the failure to raise the rule 57D(2) applicability earlier in the proceedings.

4. Judicial decision:
The judge noted that the issue of considering steel forgings as inputs under rule 57A despite the rule 57Q declaration and the application of rule 57D(2) was not raised earlier. As such, the judge declined to entertain these submissions at a later stage, emphasizing the importance of procedural fairness. Since forgings are not specified items for Modvat credit as capital goods, the appeal was rejected based on this ground.

This detailed analysis covers the denial of Modvat credit on steel forgings under Rule 57Q, including the classification, arguments presented, legal contentions, and the judicial decision based on procedural fairness and the absence of specified items for credit eligibility.