2001 (5) TMI 487 - Commissioner - Central Excise

Summary

Issues:
1. Eligibility of Valve for Chlorine Cylinders for Modvat duty credit under Rule 57Q as capital goods.

Detailed Analysis:
The case involved the appellants engaged in the manufacture of goods under Chapter Heading No. 28 of the Central Excise Tariff Act, 1985, availing Modvat credit of Central Excise duty paid on capital goods under Rule 57Q. They were issued show cause notices (SCNs) questioning the Modvat credit availed on Valve for Chlorine Cylinder and Model Spindles for Chlorine Valve. The Deputy Commissioner confirmed the demand for recovery of Modvat credit, imposed a penalty, and ordered interest recovery. The appellants reversed the Modvat credit on one SCN but later applied for retaking it, which was denied. The appellants filed appeals against the demand recovery and denial of credit restoration. The primary issue raised was the eligibility of Valve for Chlorine Cylinders for Modvat duty credit under Rule 57Q as capital goods.

The appellants argued that the valves were classified and suffered duty under CSH 8481.80, admitted in the SCNs and findings in the Order-in-Original. They contended that valves were covered under Sr. No. 2 of the table appended to Rule 57Q, making them eligible for Modvat credit as capital goods when used in the manufacturing process. The presence of valves was deemed essential for the transfer of Chlorine gas, directly contributing to the manufacturing cycle. The appellants also cited a Tribunal order supporting their claim for Modvat credit on Chlorine Cylinders/Tonners as capital goods. They further argued that if not considered capital goods, the valves should be treated as inputs for final product manufacture, entitling them to Modvat credit.

After reviewing the submissions, the judge found merit in the appellants' arguments. The valves, classified under CSH 8481.80, were covered under Sr. No. 2 of the table appended to Rule 57Q, making them eligible for Modvat credit as capital goods. The judge emphasized that the provisions of Rule 57Q(1) and the entries in the table had to be read coherently. As the valves were not part, spare, or accessory of goods specified in the table, but classifiable under CSH 8481.80, they were eligible for Modvat credit. The judge also noted a Tribunal order supporting the appellants' claim for Modvat credit on Chlorine Cylinders/Tonners as capital goods. Consequently, the judge allowed the appeals, holding that the valves were eligible for Modvat credit under Rule 57Q as capital goods, and ordered consequent relief to the appellants.